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An interest-only loan is one
that gives you the option of paying just the
interest
or the interest and as much
principal
as you want in any given month during an initial period
of time.
What
exactly is an Interest Only Home Loan?
An interest-only loan is one
that gives you the option of paying just the
interest
or the interest and as much
principal
as you want in any given month during an initial period
of time. Interest only loans can be 30-year fixed-rate
mortgages or adjustable-rate mortgages. American
Mortgage Finance offers home loans that are
interest-only for the first three, five, seven or ten
years.
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If you choose to make the
interest-only payment, your monthly payment will be
lower than it would be with a principal and interest
payment. Your interest rate may or may not be lower than
a traditional mortgage, but you will have the option of
flexible payments. Interest-only loans allow you to
control your payment amount and your cash flow in any
given month during the interest only period.
Who Is an
Interest-Only Home Loan For?
There are good reasons to
consider an interest only loan. For instance, it might
make good financial sense. Here's how: 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've
borrowed money at a good rate. Instead of paying down
that low rate loan, you could take the extra money you'd
have each month from making interest-only payments, and
invest it in something that would bring you a higher
rate of return. Or, you could pay down higher interest
debt like credit cards. 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. That may be a wise financial move.
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 home between five and seven
years. As mentioned before, 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 as they please - save
for college tuition, make home improvements.
Misconceptions
About Interest-Only Loans
A common misconception is that
if you're not paying down your loan's principal, you're
not building equity in your home. Not necessarily true.
Most homes in the U.S. have been appreciating between 5 and
6% a year. Chances are that even if you're not paying
down your principal, you're building equity in your home
through appreciation.
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American Mortgage Finance, Inc.
3003 Babcock Blvd. Suite# 102
Pittsburgh, PA 15237
Phone: 412-931-1999
Toll Free: 1-866-503-REFI
email:
info@americanmortgagefinance.net
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