Why Choose An Interest Only Mortgage?
An interest only mortgage may not seem to make much sense at first. After all, on an interest only mortgage, you only pay the interest for a specific amount of time - up to several years. That means that for the first several years, you are not paying off the base sum of your mortgage. If you have an interest only mortgage of $100 000 that has an interest only term of five years, for example, at the end of five years you will still owe $100 000. That initial sum will remain untouched by your interest payments. After the no interest term, you will be expected to start paying larger sums each month in order to pay off both the interest and the loan sum. With an interest only mortgage, you are still responsible for the entire borrowed amount - only the payment terms are slightly different than with a traditional mortgage. Many homeowners find this very intimidating, since they feel they should be paying off their mortgages as quickly as possible. A interest only mortgage, however, can save you money in the long run and can be an excellent financial decision - when used properly. Of course, if you spend the money you save on monthly payments on an interest only mortgage as disposable income, you really will be behind. However, if you use the lower monthly payments yo get with an interest only mortgage to invest or pay off debts, you may end up ahead. The truth is, an interest only loan offers lower monthly payments for a specific term - while you are paying interest only. If you buy a home that needs repairs or work, you can use this extra money to make repairs which will raise your home equity value anyway. You can also invest the savings, building up a nest egg against loss of employment or other problems that may affect your ability to repay your loan. Some people use an interest only loan to start up a house - after all, the buying of a house often creates all sorts of expenses that must be seen to. Some homeowners even use the money they initially save on an interest only loan to pay off debts. If you have many high-interest debts such as credit card debts, this can make a great deal of sense, since over time high interest debts will cost you more in interest than an interest only mortgage.
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