Interest Only Refinance

Interest only refinance options have been around since the early 1900's but took a drastic hit during the stock market crash of 1929. Making a strong come back within the last few years, interest only loans have appealed to investors, entrepreneurs, homeowners short of cash and those looking to sell their house in a few years. Providing an appealing choice, loans that require simple pay back of the interest for the first several years of the loan agreement have become very popular in the private and pubic sector of investment.

These types of loans generally have acceptable interest rates. They loosen up a consumer's cash flow and offer the possibility of owning a high end home without the present ability to pay. Caution to today's consumers has been added by analysts and financial management specialists who foresee a negative repercussion upon the financial horizon for those who have overextended their ability to pay for their present homes. Many consumers, wishing to add at least 20% luxury quality increase to what they can really afford in a home, have opted for loans that only require the payment of interest for several years. The interest only refinance rage may meet with some consumer financial catastrophes when their loan moves into the principle repayment stage.

Having provided consumers with a warning regarding interest only refinance loans, business specialists generally agree that these loans can offer productive financial strategies for those who are able to get the best out of these type of loans. Consumers who are not planning on staying in a home very long, those who have flexible incomes, those who invest in real estate and those who can afford the risk, tend to be the best suitable for this type of financing option. Generally not offering especially low rates, this loan does provides very low, monthly payments within the first 5, 7, or 10 years depending on the loan agreement.

Payments are not applied toward the principle until usually the 11th year of the loan due to low payments which deprive this opportunity. Suddenly, the payments can balloon to a huge monthly payment at that time that begins to pay into the principle. No equity is accrued for the first years and a homeowner is basically paying rent to the lender. Those that have bitten off more than they can chew financially, run the risk of defaulting on the high payments of the interest only refinance loan and losing their home and future equity. If, however, a home is a short-term investment, paying only the interest for a couple of years or so can be a real money saving tool. The success of an interest only refinancing loan depends solely upon the consumer and what he or she can financially manage. "Teach me to do thy will; for thou art my God..." (Psalm 143:10)




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