Interest-Only Home Loans

Interest-only home loans are available for buyers who want to lower their monthly payments for a period of time, with the realization that once the payments stop and the principal and interest payments begin there will be a significant increase in the amount of the monthly notes. The interest can be adjusted to meet current rates with a loan. Currently, there is a cap of 7.5% put on this type of agreement. This service is helpful for a person who knows the residence he or she is buying is temporary. There is no return on the sale of the house, but the payments have been made lower with an interest-only home loan. On the other hand, if the homeowner does plan to stay for the long haul, he or she may be counting on a substantial increase in income that will make meeting the higher notes that occur later in the period of repayment.

Most buyers choose services other than those of an interest-only home loan for their home purchase. There are advantages to a standard home loan over interest-only home loans for most home buyers. A set payment, which includes both interest and principal, is easier to budget than the payments through the other form. Even if the income increases over time, a smaller portion of that income will be required for the mortgage than with other options. Another alternative is the adjustable rate mortgages. This long-term mortgage is reviewed periodically to raise or lower the interest rate according to current standards. A change in interest increases or decreases the payments.

Refinancing with interest-only home loans is possible if the homeowner chooses. Particularly, if there is a substantial lowering of rates, it would be to the homeowner's advantage to change to a fixed interest amortization, which would lock in the low rate and allow for payment of both principal and interest. A homeowner would not be able to get an equity loan with an interest-only home loan, however, until quite late in the term because none of the principal would have been paid down. This type of agreement has an appeal to some buyers. Individuals are very diverse and so are their financial needs and concerns. The option to choose from so many different services and terms is a very important part of this process, making it important to seek help from lenders, trusted friends, and God. I can do all things through Christ which strengtheneth me (Philippians 4:13).

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