| An Interest Only Loan is a loan where for a set term | | | | an existing loan, as bridging finance or to pay for home |
| the borrower pays only the interest on the capital - | | | | renovations. Most lenders will provide borrowers with |
| leaving the capital amount owing. At the end of the | | | | their Interest Only Loan Calculator - so repayments |
| term the borrower may repay the principal as a lump | | | | can be worked out.The Advantages of an Interest |
| sum, renew the Interest-Only Mortgage, or (with some | | | | Only Loan include:Lower repayments - this may suit if |
| lenders) convert the loan to a principal and interest | | | | you wish to renovate the property, or if your income is |
| payment loan.With an Interest Only Loan, you repay | | | | infrequent eg commissions or bonuses;If you expect to |
| only the interest on the principal during the term of the | | | | have a higher income in a few years time;Reduces the |
| loan. At the end of that time - usually one to five years | | | | cost of buying an investment property in the |
| - you must repay the principal as a lump sum. As you | | | | short-term.However - Interest Only Loans, Interest Only |
| would expect, repayments are lower than with a | | | | Home Equity Loans or Lines of Credit - also come |
| standard principal and interest loan.Typically, in the | | | | with some disadvantages:Can be risky if the property |
| United States, borrowers take an Interest Only Loan | | | | market falls, you could be stuck with the property or |
| for a five or ten year period - and after that time, the | | | | forced to sell at a loss.If you decide to keep the |
| principal balance is amortized for the remaining | | | | property long term - you may be forced to repay the |
| term.Interest Only Home Loans are popular among | | | | principal in full at the end of the loan term.So...Borrower |
| investors who plan to sell the property in the | | | | Beware... Interest Only Loans suits some investors - |
| short-term for profit. If you're considering purchasing an | | | | but the risks may outweigh the benefits for the |
| investment property - then an Interest Only Loan could | | | | ordinary home-buyer!Gay Redmile is the webmaster |
| be the way to go. Offering lower repayments, with lots | | | | of several finance and investment sites. Having |
| of the same features as traditional loans, interest only | | | | purchased her own home and investment properties, |
| loans are particularly suitable for investors.However, | | | | she fully understands the importance of securing the |
| that is not to say that Interest Only Mortgage Loans | | | | best Loan available. |
| are not suitable for general home buyers, to refinance | | | | |