INTEREST ONLY LOANS

THIS LOAN PROGRAM HAS BEEN SUSPENDED

  With an interest-only mortgage loan, you pay only the interest on the mortgage in monthly payments for a fixed term, usually ten years. After the end of that term, you either refinance, pay the balance in a lump sum, or simply start paying off the principal based on a 20 year term.  Most borrowers that utilize this product have plans to pay off the loan prior to the expiration of the fixed rate period.

Lower Monthly Payments, & You Still Get Equity.......
    Interest only loans are not as strange as they may sound.  At first glance, it seems silly to pay on a loan for 10 years without bringing down the principal.  However, even on standard 30 year loans, there is not that dramatic of a reduction in the loan balance after 10 years.  The idea behind the interest only loan is the concept of property appreciation.  While it is true the loan balance hasn't fallen, the property value will very likely have increased.  Therefore, an owner still has equity, and has enjoyed lower payments in the interim.

An interest-only mortgage is typically best for:

• someone whose income is mostly in the form of infrequent commissions or bonuses.
• someone who expects to earn a lot more in a few years.
• purchasing the maximum priced house that can be afforded with the lower payments so as to take advantage the potential property appreciation.
• someone who wishes to invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and who is confident that the investments will make money.

    A typical interest-only borrower would be an executive who earns a moderate salary and whose main income is from bonuses once or twice a year. An interest-only mortgage would provide the lowest possible monthly payment for lean months, yet allow the executive to pay down big chunks of principal when bonus time rolls around.

    The interest only option can be used in conjunction with a 30 year fixed rate, 5/1, 7/1 or 10/1 ARM.  The interest rate is fixed for the period the borrower selects.

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