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If you are considering an interest only mortgage you will want to establish a term that is manageable. Many homebuyers choose to have an interest only mortgage that is converted to a traditional fixed or adjustable rate mortgage after a time of 5 – 10 years. This way, borrowers are not stuck with an interest only loan when they hope to be able to afford the larger monthly payments of a traditional loan further down the road.
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Oftentimes homeowners who opt for an interest only loan do so because they will be relocating in a few years and would like to have lower monthly payments in their temporary home. Other times the homeowner is someone who does in fact intend to stay in the home. These buyers often live in an area where the appreciation of their home is expected to beat the amount of equity they would pay down in mortgage payments each month. In this circumstance it is possible for a borrower to live in the home for years and still make money at the time the home is sold because of high appreciation in the property value.
Interest only mortgages are a less common type of home loan that many homeowners choose to begin the home ownership process with. As the name implies, borrowers with an interest only mortgage do not pay down their mortgage balance with their monthly payments – they only pay interest. This obviously results in a smaller monthly payment. However equity will not be established in the home to use for the future.
Only a qualified mortgage professional can truly help you determine whether or not an interest only mortgage is right for you. Beyond considering how long you intend to stay in your home, or what your monthly finances look like, there are other details the experience of a professional can offer you when it comes to less common interest only mortgages. Our free application will put you in touch with as many as four competitive mortgage quotes for your proposed loan. Feel free to contact us today.
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