MORTGAGE ONLY IS NOT DESIGNED FOR EVERYONE

2007-03-08 10:33:40

( Financial )



Mortgage only is a type of mortgage where borrowers pay only its interest for a specified period before paying the principal amortization. Payment of interest only last for at least five to ten years. After that period you can either pay the principal loan balance in lump sum or installment. Thus, it is expected that the amount of loan repayments will increase tremendously once you finished paying for the interest of the mortgage. You can also take a refinance loan to pay it. However, you it should be noted that mortgage only are not for everyone.

Who Benefits Most from Mortgage Only

Mortgage only mostly benefits individuals generating infrequent incomes in the form of commissions or bonuses. Individuals currently earning less but expect to earn more in the next few years will benefit from mortgage only. You can also use mortgage only if you plan to accumulate savings while you are not yet paying the principal amount of the mortgage.

Usually small business owners take advantage of interest only mortgage since it helps them manage their cash flow better. They can pay off large amount of repayments during peak seasons of the business and lesser amounts during lean seasons. Better yet they can channel some of their extra funds to a savings account designed to pay off the principal amount of the loan later on.

Who Are Advised Against Taking Mortgage Only

Regular wage earners are not advised to take interest only mortgage. They usually take home loans that are moderately sized and also they are known to be lacking in savings strategy. Thus, it is better for them to include principal payments in their mortgage repayments.

Mortgage only loans are historically availed by affluent borrowers who can afford to pay off large amount of principal payment after the period for interest payment expires. However, in recent years it has been intensively marketed to lesser affluent borrowers. Some of these borrowers, though, might not be able to handle only mortgage loan due to the nature of their income generation. Thus, they must be cautioned against taking it.


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