Interest Only Mortgage Loan
The interest only mortgage loan is secured by real estate containing an option to make an interest payment. It do not contain principal amount, interest-only mortgages available today with an option for interest-only payments. For an example, if amount lending is $200,000 with an interest of 6.5% and term 30 years, the monthly payment will be $1,254. While the payment amount for interest only loan will be $1,083 for same term.
This loan is very beneficial for 1st time home buyer, many new home buyers are struggling to making monthly payments for their loan cause the loan amount is much higher than rental fees. This loan allow borrower to pay a lower monthly payments for 1st few years, this will enable borrower has more buffer to pay for other bills.
For those who earning unstable income, they may paying less for certain months. Repay back the outstanding balance amount when received their income or bonuses.
The interest for this loan will be slightly higher than conventional loan, the differ is around 1/2 percent. For instance, the interest for 30 years term of conventional loan is 5%, for interest only loan will be 5.5%.
Some facts of the loan
1) The property will be forced to sell if the property has not appreciated.
2) If a borrower just pays the interest only without principal amount each and every months, the borrower will owe the original loan balance cause it has not been reduced. To avoid prolongation of the loan tenure, you shall paying the principal plus interest amount regularly.
3) Borrower is encourage to place a larger amount in deposit for home purchase to reduce the risk associated with an interest-only loan.
For more mortgage and home loan information, please check out
Home Loan Guide instead of Interest Only Mortgage Loan
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