Will An Interest-Only Mortgage Work For You?

Will An Interest-Only Mortgage Work For You?

 

 

Have you been researching your different options for a mortgage on your home, you might have heard of an “Interest-Only Mortgage”. Are you wondering what exactly does this type of mortgage mean and how does it work?

Usually when you take out a loan, you must pay back the capital debt (the amount you borrowed) and the interest on that debt. An interest-only mortgage offers a cheaper option for purchasing a property, because you will only be making payments on the interest and not the capital.

Compared to a repayment style mortgage where you are paying down the principle of the loan, an interest-only mortgage will have much lower monthly payments.

However, when you reach the end of the mortgage term with an interest-only mortgage, you will not have paid off any of the original principle of the loan. This means that you will still not be any closer to owning the home than when you started, whereas with a repayment mortgage you would be in full possession of the property.

You will reach the end of the loan term, still owing the lender $250,000 or whatever the value of the house was. Also, if you do not pay off that lump sum at that point, the lender will charge you interest on the entire loan for the full time.

From the description of how it works, it seems like there would never be a good situation for taking out an interest-only mortgage. However, if you are stretched financially and you are desperate to get onto the property ladder it might be a viable option. Some people take on an interest-only mortgage so that they can buy their first home, then when their income goes up they switch to a repayment mortgage.

These types of mortgages are often used by buy-to-let investors, who are able to claim their tax back against the mortgage interest. If this is your goal, you might find this strategy will work for you.

To make sure you have all of your mortgage questions answered, call Mark Taylor at 602.361.0707 or email him at mark@awesomerates.com. 

Thanks for taking time out of your bust schedule to read, comment and re-post today's blog on:

Will An Interest-Only Mortgage Work For You?

---

This Active Rain post is by Mark Taylor, to get your free mortgage approval please call 602-361-0707. Please click on the links below to view my AWESOME websites!

Mark Taylor | Arizona Home Loans | Blarming | Will You Listen to Me | Arizona Short Sales | Arizona Foreclosures | Arizona FHA Loans | Arizona USDA Loans | Arizona HUD Homes | Ariona VA Loans | Fix My Broken Credit | Arizona Mortgage | AZ Short Sale Help

Mark Taylor 15111 North Pima Road Scottsdale Arizona 85260 (602) 361-0707

Arizona Mortgage. Get a Home Loan quick and easy with The Mark Taylor Team! Home Purchases, Refinance, Short Sales, Foreclosures & More. We are the Arizona Mortgage experts.

---