Who Should Obtain Intrest Only Loans?

2008-09-29 10:50:44

( Financial )



Lenders or brokers may entice you to obtain intrest only loans, or interest only mortgages. While you may think that these loans are great, not every homeowner should take out these products. However, if you belong to any of the following, then intrest only loans may be a good fit for you.

* Your income is not frequent, but rather it is in the form of commissions or bonuses;

* You are expecting to earn more in the next few years;

* You are going to use the amount you save from intrest only loans to an investment which is sure to earn a lot of money.

People, such as executives who may have regular salary but receive their main source of income through bigger bonuses at least once a year, or businessmen who do not have predictable incomes, can benefit from intrest only loans. These individuals have the capacity to pay off their intrest only loans whenever they want.

If, however, you are a regular wage earner, financial experts would dissuade you from obtaining intrest only loans. The reason for this is that after the end of the period when you only have to pay for the interest of the loan (which is often between five and seven years), you will have to pay off the entire balance of the intrest only loans, or take out refinancing, or begin to pay the principal together with interest, which increases your monthly interest only loan payment.

Although you can afford intrest only loans, there are traps that you should be aware of. Some of these risks include losing the value of your home because of inflation, and also losing your main source of income. If you choose to invest your money in high-risk investments, you also risk losing all your money in a volatile market.


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