Mortgage GuideInterestOnly Mortgages 


InterestOnly Mortgagesby Jenny Lane There are only two things people should keep in mind before taking on an interestonly mortgage. The name interestonly mortgage is misleading. If truth be told, there is no such thing as an interestonly mortgage. In an interestonly mortgage, you will still have to pay for the loan principal. When you get an interestonly mortgage, what you’re really getting is an interestonly payment method which you can combine with other traditional mortgage types. The other thing you need to keep in mind is that the stated benefits of interestonly mortgages are exaggerated. In a standard mortgage, 95% if each dollar paid to the lender goes to the loan interest. Thus on a $100,000 standard loan with 6% interest, the total payment would be $600 with the $500 going to interest and the other $100 for equity. A Brief History of InterestOnly Mortgages Interestonly mortgages are not relatively new concepts. The idea behind interestonly mortgages was spawned from the more flexible and more inventive jumbo mortgage markets. Because of this, interestonly mortgages are traditionally a loan type preferred by savvy investors and wellheeled clients who want to use the principal portion of their payment on other more productive investments. Because interestonly mortgages are jumbo loans, the difference in monthly payment grows with the larger loan amount. For example, in a $100,000 interestonly mortgage loan, the per month difference is $100. If the loan is worth $1,000,000, then the difference per month grows to $1,000, a substantial amount that can be put to better use. The savvy investor can make it so that his investment using the money he gets from the per month difference growth of an interestonly mortgage can increase within a short period, thus leveraging incomes to build assets. This is partly the reason why interestonly mortgages are still preferred by bigtime investors. However, it is only natural to assume that there are some considerable risks associated with an interestonly mortgage, especially when it comes to stocks. Interestonly mortgages have payment periods based on adjustable rate mortgages. This however is not always the case. Interestonly mortgage payment schedules are also offered in fixed rate mortgages as well. Interestonly mortgages have also gone mainstream so virtually anyone can borrow money with this type of loan. Temporary Payment Periods The payment periods for interestonly mortgages almost never run for the entire term of the loan. Even with a fixed rate mortgage, interestonly mortgages are still bound to be only temporary. And InterstFirst product only lets interestonly mortgage payments for half of the total term. The expiration schedule of an interestonly mortgage payment is usually at the end of a set period. This makes interestonly mortgages compatible to “amalgam” adjustable rate mortgages. When the interestonly mortgage payment comes to an end your payment will then rise to include principal and interest. The great thing about interestonly mortgages Interestonly mortgage payments also have their advantages. Borrowers can find that there are various practical benefits that an interestonly mortgage can offer. First is that, interestonly mortgages can help you in accumulating assets. Because interestonly mortgages do not demand so much during its initial years, you can use the payment differential in a cash investment. The “spare” cash provided by interestonly mortgages may also be used for college money, retirement money, and even as a seasonal income factor. Of course, you are the only person who can really tell if the mortgage option is right for you or not. However, awareness of the issues that surround those choices is a good way to make a more informed decision. About the Author: Jenny Lane is a banking specialist who writes on related financing and banking industry topics. Find out more about the latest in banking industry at http://bankingtrends.com/ Source: http://www.isnare.com/ 
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