Some Guidelines On Interest Only Morgages

2007-03-08 10:33:40

( Financial )



An interest only morgage establishes the need for you to pay for the interest of your mortgage for a certain period. At the end of this specific period, the entire balance of your mortgage becomes due. This can be paid in one lump sum, or through refinancing. The rates for an interest only morgage depend on the type of interest only mortgage rate you apply for, as well as the terms of the loan.

Interest only morgages are suitable for those individuals that do not currently have the funds to pay for a mortgage loan, but expect to receive a high amount of funds in the years to come.

Those who plan to eventually refinance an interest only morgage loan can choose to:

Obtain an endowment mortgage, which can also provide you a life insurance policy at the same time. The money can be used to make investments which can potentially grow to an amount equal to your mortgage loan. The same applies for an individual savings account which can be used to make investments in the stock market.

A pension mortgage establishes the need for you to make an investment in a pension plan that can provide you with the entire or the majority amount of money to be used to pay for your mortgage loan.

Most interest only morgage rates offer variable interest rates, which fluctuate constantly. When interest rates increase, so do your monthly payments. As a result, you may end up not being able to meet your payments, which can result in a property forclosure. Consequently interest only morgages does not allow you to build equity in your home. Equity is usually converted to cash for use in extreme emergency cases. Equity is built by either paying off the principal of your mortgage, or when your property increases in market value.

If you are still decided on taking out an interest only morgage, you must realize that with the variety of types of interest mortgage plans and rates that are made available, you may find it difficult to decide on a suitable option to meet your needs. The advice of a mortgage lender will be handy in this case.


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