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Interest Only Mortgage / Interest Only Loans
An Interest Only Mortgage is a non-amortized loan where only interest is due at regular intervals and the full principal of the loan is due at the end of the loan term; typically the interest only period is for 5 or 10 years.
These loans are designed for buyers who intend to live in their homes for short periods of time, typically less than 5 years. For the remaining 25 years, these borrowers would have significantly higher payments, compensating for the first five years. The reason why these loans have been so popular over the past few years is because borrowers make lower payments than a traditional mortgage, and with home prices being so high, it’s easy to understand. In addition, interest rates are generally around 2 points lower than fixed-rate mortgages. Plus, there’s the added bonus that the full payment may be tax-deductible.
Please keep in mind, with an interest only loan; you are building equity by appreciation only, not by paying down the principal. Banks also require higher credit scores to reduce the increased risk of an interest-only loan.
If this loan sounds like it would fit your needs, contact us today! We can answer any questions you have and help you apply for an Interest Only loan.