Interest Only Loans and Interest Only Lenders
If you are trying to finance your dream home but need a low payment then an interest only mortgage loan may be for you. Dream Home Financing is one of the interest only lenders who can help you.
An interest only mortgage loan provides flexibility to the borrower in the early years of the loan. Borrowers can pay only interest only, or can choose to repay some portion of the loan balance as they see fit. However, after making interest only loan payments for a period of years (typically 10 years), the amount borrowed must be repaid over a shorter period of time, producing a significant increase in payments.
An interest only mortgage loan is one that gives you the option of paying just the interest of the interest and as much principal as you want in any given month during the interest only period.
For many borrowers, the most appealing feature of an interest only mortgage loan is that you control your payment amount and your cash flow in any given month during the interest only loan period, and your monthly mortgage payment will be lower than it would be with an interest plus principal payment. Your interest rate may or may not be lower than a traditional mortgage, depending on your specific situation, but you will have the option of flexible payments to finance your dream home.
Who Is an Interest Only Home Loan For?
There are a number of good reasons to consider an interest only mortgage loan. For instance, it might make good financial sense. On a traditional 30 year fixed rate mortgage, roughly 70% of the payment goes toward interest during the first six or seven years of the loan. If your interest rate is low, then you have borrowed money at a good rate.
Instead of paying down that low rate loan, you could take the extra money youd have each month from making interest only payments, and invest it in something that would bring you a higher rate of return. Depending on your loan amount, you could have access to thousands of dollars over the course of several years to invest or reduce high interest debt, including credit card debt.
An interest only home loan may also be a good option for people who expect to be in their homes for less than ten years. The average homeowner stays in their dream home between five and seven years. As mentioned before, home mortgage payments are mostly interest for the first years of the loan. Many homeowners like the option of making interest only payments and using the extra money for other needs….. save for college tuition, make home improvements, or buy a new car.
Common Misconceptions About Interest Only Loans
Interest only lenders would like to make sure you understand the truth about these loan programs. While an interest only mortgage loan may be an appealing option to many, there are a number of common misconceptions that you should be aware of prior to making any final decisions.
One common myth is that if you are not paying down your loans principal, you are not building equity in your dream home. This is not necessarily true. Homes in the U.S. have been appreciating between 5 and 6% a year. Chances are that even if you are not paying down your principal, you are building equity in your home through appreciation. During a time of declining real estate values, it would make sense for borrowers who have loan balances that are close to the actual value of the home to make principal payments.
Right now, you can find great rates on Interest Only home mortgage loans in New Jersey (NJ).