Interest Only Home Loans |
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An interest only home loan offers very low monthly payments for its borrowers. Instead of making large payments you can simply apply your money to the interest on the account. An interest only home loan is a great option for some people but not a good idea for most of us.When I worked as a loan officer for a financial institution years and years ago I would work one-on-one with clients who were struggling to make their mortgage payments. The company would allow the struggling families to make interest payments instead of the entire monthly sum.If you only pay the interest, the payment is much less. The families in crisis loved being able to do this once or twice each year to save extra cash but it really hurt them in the long run. The principal on the account doesn’t go down when you only pay the interest on the account. So why on earth would someone want an interest only home loan? There are many people who fair better on this type of loan simply because of their income. An individual who earns large amounts of money all at once then nothing for several months is better off getting an interest only home loan. When you have an interest only mortgage then you are sure to only pay what you absolutely must. Once you get that big check you have been waiting for you can apply a large amount to the principal on the account. With an interest only home loan, the family can breathe easier during the times of year little or no income is coming into the home. Common careers that have inconsistent incomes include sales positions. Many sales people who work on commission have to wait for a long time to see the fruits of their labor. Illustrators and book writers are often paid a sum up front and another sum when the book is complete. Some newly wed couples who expect that their income will skyrocket over time may want to look into getting an interest only home loan. However, proceed with caution. After a few years you will have to refinance or pay a lump sum on the mortgage. The monthly payments may increase drastically as well. The appeal of the interest only home loans is great because we like the idea of having control of our money. Many of the people who are interested in the interest only mortgage commonly think that they will be disciplined enough to make extra payments on the principal. That is a gamble that I wouldn’t take.
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