Interest Only Home Loan – Is This Mortgage Right For You?
Interest Only Mortgage Loan
An Interest Only Mortgage Loan can be a viable option for buying a home in the Delaware Home Loan Market. The first step to deciding if this is the right loan product for your situation is to become educated on the Interest Only Loan.
The Interest Only Loan abbreviated (I/O) is a loan in which the minimum loan payment required by the lender is only the interest on the borrowed money. This leaves the original amount of borrowed money unchanged.
The advantage of the interest only mortgage is that it provides flexibility to the borrower in the early years of the loan. Borrowers can pay only interest, or can choose to repay some portion of the loan balance as they see fit. The typical interest only period is for either five or ten years.
After the interest only period is up, the loan is recast so that the loan will be paid off in the remaining years that are left on the loan. This means that the mortgage payments may increase significantly depending on if any of the borrowed money was paid back during the interest only period.
The interest only mortgage can be a viable option for someone who needs the flexibility of a lower payment because their income may vary from month to month. The flexibility of making a lower payment can help the borrower make it thru the down months. The borrower should plan on making the full payment when possible and try to catch on the good months. This strategy would prevent the borrower from having to worry about an increase in the payment at the end of the interest only period.
The interest only loan can also be used to allow a borrower to purchase a house with a lower payment for a period of time in the anticipation that at the end of the interest only period, the borrower will be making more money. This will allow the borrower to refinance at the end of the interest only period into a fixed rate mortgage at a payment that would then be affordable.
These are just two of the situations that can be used to take advantage of the interest only mortgage. It should not be used to get someone into the house who can’t afford the full mortgage payment and who will not be projecting a significant increase in income to be able to afford a full mortgage payment in the future.
It is important that each borrower partner with a mortgage professional who will take the time to educate on the available products.
If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.
John R. Thomas – NMLS 38783
Certified Mortgage Planner – Primary Residential Mortgage, Inc.
302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office
248 E Chestnut Hill Rd, Newark, DE 19713