Can An Interest-Only Loan Help You Buy A New Home?
Not too many things are more exciting and scary than buying a new home. The most exciting part is getting those new keys and knowing you are home. The scariest part is the monthly mortgage payment -- especially for first-time homebuyers. Luckily there are affordable home loans for first time homebuyers -- and some of them are interest-only loans.
Interest-only loans allow homeowners to make smaller monthly mortgage payments than traditional fully-amortized payments. Fully-amortized payments are designed to retire or pay off the balance over the life of the loan, usually 15 or 30 years. Interest-only loans allow you to pay only the monthly interest due for a period of between 1 and 10 years. You can pay additional amounts if you want to reduce your loan balance but you aren't required to. Once the interest-only period expires, your monthly payment will be recalculated so that the loan will be paid in full over the remaining term of the loan. The new fully-amortized payment could be significantly higher than a traditional 30-year mortgage payment -- you may have the balance you started with but will have fewer years to pay it off.
When buying a new home and deciding whether an interest-only home loan is right for you, consider the following:
Are you comfortable with knowing your principal balance will remain unchanged unless you make extra principal payments during your interest-only period?
Are you expecting a promotion and/or salary increase so you can afford a fully amortized mortgage payment?
Have you compared your interest-only mortgage options with fully amortized mortgage options and do you know how much your payment can increase?
If you answered "no" to any of the three questions above you may want to explore other home financing options.
Find current mortgage rates and
local lenders for conforming home loans. For a single
family residence (in most states) this meansany new home
loan under $417,000.
Consult a licensed mortgage professional for details
pertaining to any and all available home loan programs. Not every
applicant qualifies nor is every program always available. Interest Only loans are simply another form of home
financing and this website is purely
for educational reasons and is not an offer to loan or extend credit for any reason.
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