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Interest Only |
Interest Only Mortgages
With this loan the interest only payment will save you money in
the short run because it actually cost you more over a 30 year
term of the loan. But most borrowers who get into this loan will
---- out of this before it fully amortizes itself.
Example: If you borrow 250,000 at 6% using a 30 year fixed rate
loan, your monthly payment would be roughly $1777. But if you
borrow 250,000 in a 30 year mortgage with a 5 year interest only
payment plan your payment would be $1250. Now you can see the
obvious savings. But if you allow this to fully amortize then
your payment would go up to about $1611. Possibly you might have
a higher income by then and you can afford to have your
payment jump over $360. If not, you would want to refinance out
of it.
This loan is great for someone with a sporadic income. That way
you can afford the interest only payment. And, when your income
goes up you can pay down the principle. |
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