Interest Only Mortgage Loans

Another option for repayment of home loans, which can be offered on either Fixed or Adjustable Rate Mortgages, is the Interest Only Mortgage Loan. What this type of loan repayment option does is set up a specific period, usually between three and ten years, in which the borrower is only required to pay the interest part of the payment monthly. The advantages to this payment option include very low monthly payments for the interest only period. It allows for the qualifying of a larger loan and the entire monthly payment can be written off as tax deductible. It allows for a greater chance that the money not put into equity can be invested to increase the chances of increasing ones financial worth.

At the end of the interest only payment period the loan becomes fully amortized and you will begin making payments on the principle. The monthly payments will be much higher after the initial interest only period has ended. This can be somewhat controlled by the borrower as the shorter the interest only period lasts, the smaller the full payments will be on the back end of the repayment process. It is the lender who decides just what the interest rate will be on the loan. It does not have to conform to either the current market rate or any of the Indexes used to figure Adjustable rate loans. These loans are especially lucrative for those who have plans in place to be making a greater amount a few years into the future.