Interest Only Mortgages
Interest only mortgages can be an excellent choice for many individuals. Interest only mortgages are designed to offer the lowest payment as you are not paying toward the principal in your monthly payment. Interest only mortgages may mean that you can buy more home than with a fully amortizing mortgage. You may make additional payments toward your principal balance at any time. If you do, your next interest only payment will be lower as the interest only payment is calculated on the current mortgage balance. This is different than a fully amortizing mortgage where any additional contributions to principal do not change the payment and are not accounted for until the end of the loan.
Of all the interest only mortgages available, the Cash Flow Interest Only Mortgages offer the greatest flexibility by far.
Interest only mortgages are available for a 30 year term, with the first 10 years interest only and the final 25 years fully amortizing although I am now seeing some lenders offering this option on Interest only mortgages ARMs. Some lenders who offer interest only mortgages require a prepayment penalty for the first 1-3 years and have caps on the amount your rate can change at any time and over the life of the loan. I always try very hard to avoid prepayment penalties on these and other types of loans and can usually work around the requirement. Another useful feature of interest only mortgages is that if you make a principal payment during the interest only period, your balance is reduced the following month lowering your payment further.
Interest only mortgages were originally designed for individuals whose income is cyclical. For example, an individual who is a sales executive with a relatively low base salary but commission or bonus payouts quarterly would benefit from interest only mortgages. You have the lowest possible payment during months when no bonus is paid and you would be able to make contributions to the principal balance when the quarterly bonus is paid. However, I am seeing individuals in many situations choosing interest only mortgages as a method of lowering their payment, sometimes significantly.
Again, interest only mortgages are 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:
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 simple
interest payment is, Loan Amount x Interest Rate / 12.
I have just developed a short PowerPoint presentation in .pdf format on these products, some real world examples, and some suggestions on how best to use them available by email
Read more about Interest Only Mortgages Closing Costs
Learn more about Loan Modification. If you can not refinance, it may be the best way to save your home today.
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.
for your interest only mortgages.