Interest Only Mortgages

These days, as people scramble for new and morelarge commissions or bonuses throughout the year,
creative ways to finance buying a home, the interestthose who can reasonably expect to be making
only mortgage is becoming more common and wellconsiderably more income in a few years than they
known. An interest only mortgage is one in which youare now, and those borrowers who actually WILL
have the option of paying only the interest (or just theinvest the difference between their interest-only
interest and a portion of the principal) each month inpayment and their full mortgage payment in profitable
the early years of the mortgage loan. Interest onlyinvestments.
periods may be applied to adjustable rate mortgages,The power of an interest-only loan, according to most
or 30 year fixed rate mortgages, depending on theexperts, is that you can 'afford to buy more house'.
lender.Because you'll have the choice during the early years
In a traditional mortgage, each month your mortgageof paying only the interest each month, you can
payment is divided in two parts - one part is paid oneffectively afford the monthly payments on a house
the interest charge, the other on the principal of thethat's as much as 30% more expensive than you
loan. The main feature of an interest only mortgagecould with an amortizing (typical) mortgage payment.
loan is that during a specified initial period of time -You also, however, have the choice each month of
usually three, five, seven or ten years - you maypaying the interest plus as much on the principal as
choose to make a payment of the interest portion ofyou wish. If you're a salesman, for instance, whose
the loan only. The option is flexible. One month youstandard income is supplemented quarterly and
may choose to make an interest only payment,semi-annually by large commissions or bonuses, you
another you may choose to make ancould pay interest-only during lean months, saving
interest-plus-part-of-the-principal mortgage payment, oryourself up to $350 in those months. In the months that
a full, standard monthly mortgage payment. Needlessyou get a large commission though, you could choose
to say, an interest-only payment will be significantly lessto pay down several thousand dollars on the principal.
than a traditional mortgage payment.An interest only mortgage also makes sense if you
The flexibility of an interest-only mortgage allows youhave a solid investment plan. If a typical mortgage
to adjust your mortgage cost on a month by monthpayment would be $900 monthly, and your
basis, giving you more control over your monthly cashinterest-only payment for the month is $625, then the
flow. In any given month during the interest-only period,best financial strategy according to many financial
you have the flexibility to pay as much or as little onexperts is to invest the remaining $275 in a solid,
your mortgage as you can.money-making stocks program.
Interest only mortgages aren't right for everyone. WhileInterest only loans are not for everyone, but they can
you have the option of paying interest only eachbe a valuable financial tool that can help you control
month during the early years, the principal repaymentyour spending and give your investment power some
on your mortgage loan is accumulating. At the end ofadded oomph. Don't rush blindly into an interest only
your interest only period, your mortgage payment willmortgage, but do speak to a financial expert or loan
take a dramatic jump. Financial experts recommendofficer about whether an interest only loan may be
interest only mortgages for specific types ofright for you.
borrowers: those whose income is supplemented by