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Interest Only Mortgage / Home Loans:Everywhere you look nowadays you see ads for interest only home loans (or mortgages). Are you asking what is an interest only mortgage, or how to get an interest only home loan? If you answered yes to the above questions just keep reading and we will do our best to help you review your options when it comes to your mortgage (house payment). Interest only home loans can be confusing and difficult to understand, but there are many benefits (tax breaks, lower payments, shorter terms) for the homeowner who decides to choose an interest only loan. A typical scenario would look something like this: A homebuyer in Las Vegas NV buys a house for $165,000 and takes a 5 year (fixed rate) interest only loan which makes his monthly mortgage payment $1035. If this home owner was to get a standard 30 year fixed loan on the same house, his monthly payment would be $1200. As you can see by taking the interest only loan the homeowner saves about $170 per month because they don't have to pay any principal (money that actually goes towards paying down the entire loan balance of $165,000). The main difference between a 30 year fixed mortgage and an interest only mortgage is that on the interest only loan you never pay off any of the starting loan balance - in this case the $165,000. Interest only loans have become more popular along with option arm loans, helocs, and equity lines of credit, because most Americans today are spending more than they earn and want to live in a way that makes them look wealthy.
Be very careful when considering an interest only home loan for many reasons: 1. If you live in a city with little or no appreciation in the real estate market you could lose money on your home when you sell it after realtor fees and other costs (closing, repairs, title fees). 2. Most interest only loans are not fixed (meaning the interest rate you get will change every year or so and usually the rates go up making your mortgage payment even bigger. 3. Interest only loans usually carry a pre-payment penalty which means if you sell or refinance your property (within a certain amount of time - usually 3 years) you will have to pay a fee to the lender (typically 6 months of your mortgage payment). When shopping for an interest only mortgage do your homework and don't agree to the 1st loan you are offered. If you are looking for more information on a home mortgage check out Ditech.com.
Interest Only Mortgage Calculator:Most homeowners work hard and pay their bills on time which is how they managed to buy a house in the 1st place. With changing interest rates and the real estate market booming (in areas like California, Las Vegas, Phoenix, Boston, etc.) many people are looking to interest only loans as an affordable way to buy property. Before you decide that an interest only mortgage is your best bet, there are a few calculations that you must do to figure out what is right for your situation. The best interest only mortgage calculator we found online was mortgages.interest.com/content/calculators/InterestOnly.asp where you can see exactly what your house payment would be every month with an interest only mortgage - versus the standard 30 year fixed mortgage. If you need to get home loan rates or quotes check out www.nevada-homeloans.com for further help. To get an estimated payment from the interest only mortgage calculator you will need to know the following information: value of the home (condo, townhouse, etc), down payment, yearly salary, credit history. Today a lot of homeowners and investors are refinancing their current mortgages into an interest only loan because it offers a lower payment, which in turn gives the borrower a bigger monthly cash flow - something we could all use.How to Get an Interest Only Mortgage?:Many homebuyers (and even home owners looking to refinance) wonder what steps are involved with getting an interest only mortgage (also known as an IO loan).
Things To Do Before Applying for an Interest Only Mortgage:There are many things that you should do before you apply for a home loan and hopefully you find our review helpful. The first thing any homebuyer (1st time homebuyers also) should do before thinking about purchasing a home is to check their credit. Most lenders and banks (Wells Fargo, Bank Of America, Countrywide, etc.) determine how risky a borrower is by his credit score (known as your FICO score) and his credit history (# of open accounts and length of credit history). If your credit score is considered good, let's say over 700 , then the lenders will offer you lower interest rates and better terms. If you were to buy a house for $150,000 and got an interest only mortgage at 6.75 %, your payment would be about $1000 a month. Sometimes just raising your credit score 20 or 30 points can lower your interest rate a 1/2 point which in the example above would lower your payment by $100 a month (over 5 years that adds up to over $5000). The average credit score in America is 675 and if your fico score is below 600 then you will have difficulty finding a decent home loan. The best resource we reviewed online for checking your credit score is myfico.com. They offer a lot of free information about debt consolidation, refinancing, and even offer a free trial for new members. Another important thing to do before jumping into a home purchase is to consider how long you plan on living in the home (and if you do move will you sell the house or rent it out to tenants). The length of time you plan to live in your home is important because you can get interest only mortgages that vary in length. Lenders offer 3, 5, 7, 10, even 15 year terms on interest only loans and the longer the term you want the higher interest rate you will receive. The average person moves every 7 years so depending on your long term goals you might consider getting a shorter term loan. A 15 or 30 year fixed rate loan is great for a family or somebody who intends on living in the same place for a long time, but if you are single or just not sure about your future you might be better to go with a shorter term loan (say a 5 or 7 year fixed mortgage).
Benefits of Interest Only Mortgage:1. Can buy a bigger, more expensive house - good for 1st time home buyers 2. Helps avoid the stress of a huge mortgage payment 3. Interest payed on the mortgage is tax deductible 4. Owning property helps build your credit and raise your fico score
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