An Interest Only Mortgage Rhode Island is somewhat of a misnomer. Although the name implies that it is a mortgage loan, it is actually a choice available to a borrower as part of the mortgage loan, whether it is a fixed or adjustable rate mortgage, a debt consolidation or any other loan. What this means is that only the interest on a mortgage loan is paid for a pre-set time, usually one to five years, before any of the principle is paid. Only the interest is due every month during the first phase of the loan, leaving the entire principle amount intact. Monthly payments are not necessarily limited to the interest only payment, however; the Interest Only Mortgage RI payment can include part of the principle, which reduces the principle amount owed. Paying part of the principle during the Interest Only Mortgage RI phase will lower the next monthly amount due, thus shortening the term of the loan.
One of the upsides of an Interest Only Mortgage RI is the flexibility it provides for those who expect incomes to increase by the time the larger principle payment is due or for buyers who have seasonal or fluctuating employment. During lean times or the off-season, the interest only payment amount is affordable. When there is more cash inflow, an amortized payment can be made.
While this type of loan seems ideal in that it figures to a lower payment at first, it must be understood that payments will rise after the interest only phase. Additionally, interest only payments do nothing to reduce the actual debt owed, that is, the principle portion of the loan. With an Interest Only Mortgage RI, the interest rates might be much higher because the risk to the lender is greater. Interest Only Mortgages RI are not an advantage time wise, since they are tend to be paid down at about the same rate as conventional amortized loans. Comparing interest rates, payment schedules, closing costs and fees, and factoring in income increases with projected increased payments will help perceptive consumers decide if an Interest Only Mortgage RI is the right choice.
At Ascent Home Loans, our knowledgeable staff is available 24 hours a day 7 days a week. Visit us online at www.mortgage401.com and let us help you discover the best financing options for you.
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