Interest Only Mortgage Loans

You looked at the idea of buying a home? If you have, you have heard about the interest may be only loans and mortgages, if only one interest-free loan for you a miracle. What is of interest only mortgage? As the name implies, this type of mortgage arranged so that the borrower (you) pays only the interest on the loan application through the payment of interest and part of the main tree species. Of course, this is not for the life of the loan. If you have a mortgage, interest payments over several years will be created.

After several years, the financial statements of the borrower in a single mortgage interest on a more traditional, where he begins to repay the principal amount, as well. As a general rule, mortgage interest only created with payments, interest only during the first ten years, and then comes loan will be changed.

The reason why many people are interested in having the benefit of only mortgages that allow borrowers pay significantly lower in the first ten years. Since you do not pay all the customers, resulting in lower payments than they would with conventional financing. If you buy a home, house and expect higher returns over time, you can claim the mortgage interest only in connection with the reduction of payments, thereby reducing the debt to income ratio. If you are an investor, interest only mortgage, you can save more cash, better to keep the house in connection with the sale or just more of your money in your pocket if you're interested in selling the property quickly.

There are disadvantages interest mortgages, as well, but. The big disadvantage is that it is more risky for the borrower. With conventional loan, you build equity in your home from scratch, but not so much on the ground, as well as traditional loans, the majority of payments have been made in the interest first. Mortgage interest only, but you absolutely do not build equity. Justice for the repayment of the principal, and since you are not a senior officer to pay, you do not build equity.

What is the problem of not building equity? Well, you run the risk, unable to pay higher interest rates at just gone over the years, as these payments are likely to be higher than they were themselves ready. So, if you do not put your career in mind the money that you expect you will find not afford to pay. In addition, you may not be in the house when you are ready to sell if the relevant period, the buyer enters the market. In addition, you can get a Home Equity loan (refinance) as well as loans on stock markets in your house, and with interest on a mortgage, you build no equity.