For most home loan types, your monthly payment will consist of some interest and some principal, so that you’ll be paying both at once. With an interest only mortgage though, you’ll pay only interest on your payments for a specific period of time (typically 5-10 years) while your principal will remain unchanged. By paying interest only, you’ll be reducing your monthly mortgage payments, enabling you to buy a more expensive home.
Interest only home loans can be a great way to free up your cash, allowing you to invest it towards other things such as retirement, college tuition or a rainy day fund.
Who Should Consider An Interest Only Mortgage?
- Home buyers who are pretty certain their income will grow, but would like the advantage of buying more home now.
- Home buyers who know their time frame for home ownership, but are more interested in lower monthly mortgage payments than building equity.
- Home buyers who want to invest their money elsewhere rather than in their home.
- Home owners who are ok with the prospect of their monthly mortgage payment going up when the interest only term ends.
- People who own investment homes and rent them out.
To see if an interest only home loan is right for you, call us at 1-866-934-7283 today or find a home loan expert near you.
Other Items to Consider with Interest Only Mortgages
While interest only home loans give you access to low monthly payments during the initial term of your loan, your monthly payments will rise in order to pay off the principal of your loan when this term ends.
Due to this, some homebuyers can overextend themselves and may be unable to pay the higher monthly payment. If you don’t expect your income to increase in 5 to 7 years or you think you’ll be unable to make the larger payments later on, you may want to consider a different loan option like a 15 or 30 year fixed rate mortgage.
In addition, if the value of your home doesn’t increase while you have an interest only home loan, then it may be harder to refinance your mortgage. Your local home purchase expert can discuss these additional considerations with you further.
How Can Guaranteed Rate Help Me With My Interest Only Home Loan?
At Guaranteed Rate, we’ve helped hundreds of thousands of people with their home loans, while holding a 95 percent customer satisfaction rating. We have home loan experts licensed in all 50 states and Washington D.C.
Our home purchase experts are continually being recognized as the best-of-the-best. We regularly have the most home loan experts recognized in Top Loan Originator lists out of any other mortgage company in the country by both the Scotsman Guide and Mortgage Executive Magazine!