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Interest Only Mortgage

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Interest Only Mortgage Payment

Interest only mortgage payment products can be an excellent choice for many consumers. Interest only mortgage payment products offer the lowest payment. Interest only mortgage payment products mean you can buy more home, or if you are refinancing into an interest only mortgage payment, you will have a lower payment than with a fully amortizing mortgage. You may make additional payments toward your principal balance at any time. By reducing the balance, the next payment will be lower as your payment is calculated on the current amount. This is a significant difference from a fully amortizing mortgage as extra payments do not change your payment at all.

Interest only mortgage payment products are available for a 30 or 40 year term, with the first 5 or 10 years interest only (depending on the lender selected) and the final 20 to 25 years fully amortizing although I am now seeing many lenders offering this option on Interest Only Mortgage Payment ARMs with fixed rate periods of 3, 5, and 7 years being the most common. At the end of the interest only period, your mortgage will convert to fully amortizing for the remaining term. There will be a payment increase at that time so you will want to select a product with the longest interest only period available. Reduced documentation Interest only mortgage  payment loans are readily available as well.

Of all of the Interest Only Mortgage payment programs available, the Cash Flow Interest Only Mortgage Payment offers the greatest flexibility by far.

Interest only mortgage payment products were originally designed for individuals whose income is cyclical. For example, a sales executive with a relatively low base salary and commission payouts quarterly would benefit from an interest only mortgage. You have the lowest possible payment during months when no bonus is paid and you can make contributions to the principal balance when the bonus is paid. However, I am seeing individuals in many situations choosing an interest only mortgage payment as a method of lowering their payment, sometimes significantly.

This, or any other product, will not be the right choice for everyone, but it can be a very effective choice for some individuals. Please call or send an email with the specifics of your situation and I will be happy to discuss this alternative with you.

An example of how powerful this tool can be:

On a $250,000 mortgage at 6.000% for 30 years-
Principal and Interest payment= $1498.88
Interest Only payment at 6%= $1250.00
Total Monthly savings= $248.88

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 simple interest payment is, Loan Amount x Interest Rate / 12.

I have developed a PowerPoint presentation on interest only mortgage payment products, some real world examples, and some suggestions on how best to use them available by email

Read more about Interest Only Mortgage payment Closing Costs