Is An Interest Only Home Loan For You?
Monday, November 13, 2006
An interest only home loan is appealing because it offers
borrowers to have a very low monthly payment. The payments are
low because you are only paying the interest on the loan. You
are not paying anything on the principal balance of your home.
While an interest only home loan is a great option for some
people, most of us will not find such a loan option to be
productive or beneficial. This is because we want to be working
towards owning our home, and that can only be accomplished by
paying off the principal balance in addition to the interest
due.
For some families struggling to pay their monthly mortgage
payment, an interest only home loan may be the only way for
them to get a low enough payment that they will not be
foreclosed on. Generally, this option would be a short term
loan due to an unexpected change in household income such as
illness or the loss of a job. It would then be possible to
obtain a regular mortgage loan after the income in the
household has increased to a level that will allow for the
repayment of a mortgage to be met.
Those who make substantial amounts of money during parts of the
year might choose to have an interest only mortgage because
their income is so low during other parts of the year. Sales
positions and other jobs that pay on commission can lead
employees into accepting interest only mortgage loans because
the amount of their income is so inconsistent. Others who
benefit from such loans are workers displaced by the job market
who then take a new job at a lower salary as well as for
divorced people who are left trying to meet household expenses
on only one person's income.
If you do have to accept an interest only mortgage loan, it is
in your best interest to only pay the minimum payment. Unlike
most loans, paying additional amounts will not benefit you in
any way. Instead, it is recommended that you save up the extra
funds. You can then specifically request for that amount to be
applied to the principal due on your mortgage. This is a very
smart way to take full advantage of the interest only loan
payment while still earning some equity in your home.
The appeal of the interest only home loans is the ability to
have a much lower payment than any traditional loan. You will
have to decide if the benefits of such a loan outweigh the cost
of not building equity in your home. For each household, the
decision depends on your income, household circumstances, and
how disciplined you are with your finances.
About The Author: If you're considering an interest only home
loan or have other questions or concerns about mortgages or
real estate visit our websites for more answers at
http://www.makemoneyplans.com and
http://www.real-estate-adventures.com
posted by Dennis Cheesman @ 5:40 AM,
