INTEREST ONLY MORTGAGES

The term “interest only”  in interest only commercial mortgage refers to a commercial mortgage loan for which the borrower only makes payments on the interest for a set period of time at the beginning of a loan’s term, and not the principal amount. After this set time period has elapsed, the loan is amortized to require payment on both the principal and interest.

Benefits of an Interest Only Commercial Mortgage

When it comes to financing a home purchase, sometimes flexibility in payment options is just as important as low mortgage rates. Fixed rate and adjustable rate mortgages are certainly not your only options when it comes to home loans, so investigating some different types could help you find a way to make home ownership more affordable. Take interest only mortgages and pay option mortgages–see how these two types of home loans could be your best bet.

Interest-Only Mortgages

Everyone has his or her own version of the American dream. If yours is home ownership, you will need to clean up your credit history and find the proper mortgage loan for your needs. There are hundreds of mortgage options currently available within the home financing industry–one such home loan option is the interest only mortgage.

During the introductory period of an interest only mortgage loan, the monthly payments you make will only contribute to the interest you owe, not the principal amount of the loan. This strategy allows borrowers to have lower monthly payments at the beginning of their mortgage payment cycle. Typically, interest only loan mortgage periods last from around five to ten years.

Interest only mortgages have been one way to make home ownership a reality for decades. These types of home loans allow borrowers to pay the lowest monthly payment possible for many years. In the beginning of the loan, mortgage holders are only responsible for paying off the interest, not the principal balance associated with their loan. Although it may sound enticing, however, there are some huge potential drawbacks associated with interest only home loans. Fully review the possible dangers of an interest only mortgage before committing to one:

• Balloon Payments: Financial expert, Suze Orman, has warned people to think twice about relying on interest only mortgages. According to her House Rules column on Oprah.com, she advises “If you can’t refinance your interest-only loan in a few years because you haven’t built up equity, you’ll get hit with some painful payment hikes.”

The beauty of borrowing money for a home is that you have plentiful options. There is no one right way to select and pay down a mortgage and you may be considering a lesser known option like an interest only mortgage loan. These loans are quite a bit different from their traditional counterparts, so understanding the nuances of each can help you choose the best home loan for financing the big purchase.

Traditional Mortgages

Americans have a rare opportunity these days to obtain a home when both property values and mortgage rates are at historical lows. However, buying a home is no easy task and this huge financial step requires diligent planning and saving. For those longing to obtain a home when their budget is tight, interest only mortgage loans have been the bridge between coveting and owning.

Interest only mortgages allow borrowers to pay the lowest possible monthly amount for a fixed period of time because they only require the interest (not the principal amount) be paid for a predetermined contract period.

Interest only mortgages are just one-way homeowners can help finance the purchase of their dreams. During the initial term period of an interest only mortgage, borrowers are responsible for paying back the only the loan interest and not the principal borrowed. However, before you decide on this type of loan, you need to weigh both the pros and cons:

Pros of an Interest Only Mortgage Loan

If you’re house hunting these days, you may have come upon a popular loan known as the interest only mortgage, often referred to as an I-O for short. An interest only mortgage is a type of mortgage loan in which the borrower makes monthly payments on the loan’s interest and not the principal for a set period of time.

Interest Only Mortgage Loan Definition