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Interest-only Mortgage

By
Services for Real Estate Pros with InboundREM

An interest-only mortgage is a type of loan in which principal payments are waived for an initial period, typically the first five to ten years. After the interest-only period ends, the principal begins to be amortized, making the cost of the factors higher. Since you are now paying principal and interest over a much shorter period, your monthly payments will increase significantly.

Nonconforming mortgages, of which interest-only loans are a subset, are hard to secure. Both adjustable-rate and fixed-rate options are available for interest-only mortgages.  Interest-only loans with a set interest rate are now difficult to find. An interest-only mortgage is a mortgage in which the borrower pays only the interest.

 

BENEFITS OF INTEREST-ONLY MORTGAGES:

 

Lower Initial Monthly Payments
Monthly payments are typically lower than they would be for various other types of loans because you only pay interest for the first few years of the repayment period.

 

Potential Increase Excess Cash
Spending less on monthly mortgage payments could save you hundreds of dollars over the loan term.

 

Lower Interest Rates
Given the flexibility of an adjustable-rate mortgage, this type of loan often offers better affordability than a fixed-rate mortgage.

 

Faster Payoff of Loan
The principal on an interest-only mortgage will decrease whenever principal payments are made, which means that your monthly payment may diminish if you make principal payments in addition to interest. To speed up the payoff of a conventional loan, you can make extra principal payments, but your regular payments won't change.

 

Flexible Payment Arrangements
Paying your principal balance with extra interest payments is typically allowed with interest-only loans. Interest payments can be reduced in most cases at any time. This can be especially helpful if your income varies monthly; for example, if you receive a bonus one month and a smaller paycheck the next.

 

Allows you to Acquire a Pricier Residence
Due to the lower interest-only payments required during the introductory period, an immense loan amount may be available to purchase a more expensive and spacious home.

 

Finding Your Lender


There are benefits and drawbacks to having an interest-only mortgage. This could be the best choice if you're looking for a lower monthly cost or a temporary place to live. Remember that you'll have to make principal payments at some point. If you're curious about whether or not an interest-only mortgage is right for you, we invite you to contact us. All the options you have to choose from are good, but our team of experts can help you determine which is the best.

Comments (1)

Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Thank you for sharing the information. Buyers and sellers in your area will benefit from your expertise. Wishing you continued success.  Have a wonderful day and sell a house.  bill

Jun 29, 2022 10:31 AM