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 mortgage where the borrower makes monthly payment on the loan's interest only. Let's say you buy a home for $300,000. You put down $50,000, so the total amount you had to borrow from the bank, credit union or other lending institution totaled $250,000. That is the principal of your loan. The lender also charges you interest on that $250,000. With a typical mortgage, you'll make a monthly payment that will pay the interest, plus a small amount of the principal. The goal is to pay the interest and get your principal down.
With an interest-only mortgage, your lender is offering you the chance to pay only the interest on your principal. Usually, this offer only lasts for an introductory period and then you have to start paying off the monthly interest, as well as the principal. If you're tight on cash, then an interest-only mortgage may be the right one for you.
To learn more about interest-only mortgage, adjustable rate mortgages, fixed rate mortgages, and other kinds of home loans, be sure to consult with a financial expert. He or she can walk you through your options and help you decide which kind of loan is right for you. You may find that an interest-only mortgage might be perfect for your needs.
