Interest Only Morgage Loans - Rates & Information About IO Loan Programs...
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1. Inconsistent Income - If your income varies on a monthly basis then having the flexibility to pay less on any given payment by using the Interest Only Option can be highly beneficial.
2. Create Cash Flow - Having a lower monthly payment is an excellent way to free up cash for investment purposes. When you consider that Stocks average over 10% Annually when averaged over the years, it makes more financial sense for many people to invest in such stocks rather than spend that same money paying down a 6.5% mortgage. Over five to ten years the earnings of such Stocks can be significantly greater than the amount you would have paid into principal. It could free cash for other investments, too, such as other real estate purchases. It may also be a better long term option to pay off auto loans or higher interest rate credit cards by using the Interest Only Option.
3. Purchasing A Nicer Home - Having lower payments can allow you to buy a more expensive home. This is a very sensible thing to do when you are buying a 'Starter Home' or are otherwise certain that you would outgrow a lesser home in the next two or three years. This is because you would incur Morgage Costs and Real Estate Commissions if you were to sell your home only in order to buy the nicer home---the home that would have been affordable had you utilized an Interest Only Morgage. So these significant 'future transaction costs' can be avoided by using an Interest Only morgage right now.
Other Important Morgage Terms
Joint Liability: Liability shared among 2 or more people, each of whom is liable for the full debt.
Joint Tenancy : The ownership of property by two or more persons with the survivor taking the share of the deceased.
Junior Morgage: A morgage subordinate or secondary to another morgage. In the event of a foreclosure a senior morgage will be paid prior to a junior mortgage being paid.
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Interest Only Morgage Programs
Interest Only Morgages are loans where the monthly payment provides you with the option of only having to pay the interest due with out having to contribute to the reduction of principal. The option of not having to pay into the principal gives you a lower monthly payment and also provides you with the greatest taxation benefit over time. However, it should be noted that if you use the Interest Only every month that your loan balance will not go down...because of this it is considered an ideal morgage primarily for those that fit into the following categories:1. Inconsistent Income - If your income varies on a monthly basis then having the flexibility to pay less on any given payment by using the Interest Only Option can be highly beneficial.
2. Create Cash Flow - Having a lower monthly payment is an excellent way to free up cash for investment purposes. When you consider that Stocks average over 10% Annually when averaged over the years, it makes more financial sense for many people to invest in such stocks rather than spend that same money paying down a 6.5% mortgage. Over five to ten years the earnings of such Stocks can be significantly greater than the amount you would have paid into principal. It could free cash for other investments, too, such as other real estate purchases. It may also be a better long term option to pay off auto loans or higher interest rate credit cards by using the Interest Only Option.
3. Purchasing A Nicer Home - Having lower payments can allow you to buy a more expensive home. This is a very sensible thing to do when you are buying a 'Starter Home' or are otherwise certain that you would outgrow a lesser home in the next two or three years. This is because you would incur Morgage Costs and Real Estate Commissions if you were to sell your home only in order to buy the nicer home---the home that would have been affordable had you utilized an Interest Only Morgage. So these significant 'future transaction costs' can be avoided by using an Interest Only morgage right now.
Other Important Morgage Terms
Joint Liability: Liability shared among 2 or more people, each of whom is liable for the full debt.
Joint Tenancy : The ownership of property by two or more persons with the survivor taking the share of the deceased.
Junior Morgage: A morgage subordinate or secondary to another morgage. In the event of a foreclosure a senior morgage will be paid prior to a junior mortgage being paid.