Typical mortgages require borrowers to pay some interest and principal in every monthly payment. An Interest Only mortgage enables borrowers to lower monthly payments by only paying interest on a mortgage for a specific period of time, typically 5 to 10 years.
Interest only loans work well in a variety of situations (single parent’s mortgages, relocation mortgages, first-time home purchases, etc.) when used properly. For example, if your income varies due to bonuses or commission-based work, you might save by only paying interest and making larger principal payments when you receive larger portions of your income.
Interest only loans can be good to free up money for retirement, college accounts and even a rainy day fund.
Advantages of Interest Only Loans
Interest Only Loans benefit a bevy of applicants:
- Borrowers who are certain their income will grow, but would like greater purchasing power right now.
- Borrowers who know their time frame for home ownership, and are more concerned with lower payments than building equity.
- Borrowers who don’t wish to tie-up equity in their home and are looking to invest their money elsewhere.
- Real Estate Investors looking for a valuable way to manage their cash flow for their investment property.