Interest Only Loan
Interest only loan products can be an excellent choice. Interest only loan products are designed to offer the lowest payment possible as you are not paying toward the principal. The interest only loan may mean that you can buy more home than with a fully amortizing loan. You may make additional payments toward your loan balance at any time. If you do, your next payment will be lower as it is calculated on the current loan balance. This is different than with a fully amortizing loan where any additional payments are not accounted for until the end of the loan. Email interest only loan questions
Interest only loan products were originally designed for individuals whose income is cyclical. For example, a sales executive with a relatively low base salary and commissions would benefit from an interest only loan. You have the lowest possible interest only payment during months when no bonus is paid and you would be able to make contributions to the loan balance when the bonus is paid. I am seeing individuals in many situations including self employed individuals choosing an interest only loan as a method of lowering their payment, sometimes significantly.
An interest only loan is available for a 30 year term, with the first 5 or 10 years interest only and the final 20 to 25 years fully amortizing. I am now seeing some progressive lenders offering this option on Interest Only Loan ARMS. An interest only arm loan with a lower rate than a fixed rate can be very effective if you do not plan to be in the home for 30 years. However, always try to match the fixed period of the arm to the period of time you plan to be in the home to avoid a payment increase when the interest only loan begins to adjust. Reduced documentation interest only loan products are also available
Again, an interest only loan is not the right choice for everyone, but it can be a very effective choice for some individuals. Please give me a call or send an email and I will be happy to discuss this alternative with you.
An example of how powerful this tool can be:
Of all of the products available, the Cash Flow Interest Only Loan offers the greatest flexibility by far.
If you want to make the comparison for your own specific situation, calculators to find the amortizing payment are available on this website. The math to find the interest only payment is, Loan Amount x Interest Rate / 12.
Read more about Interest Only Loan Closing Costs
I have an article "Buying your home in 2008" by email explaining negotiating strategy in today's market.
As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come. Read more about this free, no obligation service.
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