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Interest Only Loans
An interest only loan is a loan in which, for a set
term, the borrower pays only the interest on the
principal balance, with the principal balance unchanged.
At the end of the interest only term the borrower may
enter an interest only mortgage, pay the principal, or
(with some lenders) convert the loan to a principal and
interest payment (or amortized) loan at his/her option.
An interest only loan is a good means of either
increasing your home purchasing power or maximizing your
flexibility to control cash flow. You can save a
significant amount of cash for investment, savings, or
other expenditures during the first ten years of your
interest only mortgage loan.
Interest only loans are also a solid strategy to
maximize tax deductibility, with more funds available
for paying down higher cost, non-deductible consumer
debt. With these loans, the minimum payment required
covers interest only. You, the borrower, decide how much
or how little of the principal to repay each month.
With an interest only loan, home buyers typically decide
on a monthly mortgage payment that they feel comfortable
with and either qualify for more home, or have more cash
in reserve for investment, paying down higher-cost debt,
or making home improvements. |
