| Interest only loans are a type of mortgage that | | | | years or less. This enables them to pay just the |
| provides the option of paying just the interest on the | | | | interest as long as they are in the house and then |
| loan for some time of the repayment period. The | | | | repay the loan when they move out. The extra money |
| principle can be repaid after say 3, 5, 7 or 10 years. | | | | can be used for meeting unexpected expenses like |
| These loans also allow for a large principle | | | | college, or medical expenses, or to finance home |
| prepayment if desired. After the initial period, the | | | | improvements. In short, interest only loans enable you |
| repayments are raised to fully amortized levels. | | | | to manage your cash flow better.However, there are |
| Interest only loans can be fixed-rate mortgages or | | | | also some disadvantages. The interest rate may go up |
| adjustable-rate mortgages.There are several | | | | considerably after the interest-only period, significantly |
| advantages and disadvantages of interest only loans. | | | | increasing the payments. This increases the risk on the |
| Interest only loans are suitable for people who are | | | | loan. Another possible risk is when people plan to |
| expecting increase in the income in coming years; | | | | repay the loan by selling the house that the loan was |
| whose income is in the form of indefinite bonuses and | | | | taken against. The price of the house may not have |
| commissions and people who will invest the savings | | | | appreciated as much as expected. Worse still, the |
| made on interest-only loans properly. The main | | | | price might have even dropped. Loss of income, a |
| advantages of interest only loans are that the initial | | | | slump in the economy and other unexpected |
| interest to be paid is, and it allows for more savings | | | | contingencies should also be considered. Or worse, it |
| that can be invested some where else, like paying off | | | | may even come down, making the sale and |
| another mortgage or a high interest debt like credit | | | | repayment difficult. Loss of income, slump in the |
| cards. The extra money can also be invested for a | | | | economy and other unexpected contingencies are |
| higher rate of interest so that you can earn money on | | | | also some things to be considered while going for an |
| it. Interest only loans are ideal for people who have | | | | interest only loan. |
| taken out a loan on a home that they will live in 10 | | | | |