Principal Facts about Interest-Only Mortgages
"Interest-only mortgages are those where the borrower is required to pay only the interest on the loan for a fixed period of time, though the borrower has the freedom to pay more than the interest. This fixed period usually lasts around 5-10 years. However, if the borrower pays only the interest during the initial period, after the interest-only period ends, the borrower has to pay the entire principal along with the interest within the remaining mortgage term.
Consider the example of a certain amount borrowed at a fixed rate of 6% for 30 years. During the initial interest-only period of say 5 years, the borrower is required only to pay the 6% interest amount each month.
But after this ends, the monthly payments increase to include the amortized principal and same interest, spread over the remaining 25 years.
Comparing this with the normal amortized plan, where the monthly loan amount is broken into fixed monthly payments with a fixed interest rate for the entire mortgage term, the total amount paid in an interest-only plan is comes out to be higher, as also the monthly payments after the interest-only period ends.
Risks Involved
The various risks involved with interest only-mortgages include the following:
Since the monthly payments in interest-only mortgage plans increase after the initial period, this means one is betting on an increase in income by that amount to be able to afford the increased installments. However, if the income does not increase, the monthly payments might seem to be a shocking increase.
If one is planning to move out of the newly-purchased home after the interest-only period ends, it is again a bet on an increase in the property value in the market which can be used to pay the loan.
However, if the value does not increase or worse still, if it decreases, one can be quite deeply in debt.
Benefits
Despite the above-mentioned risks, interest-only mortgages offer considerable benefits to certain types of customers:
For those who wish to invest the savings from small monthly payments into other assets, this is a good option.
Those who plan to use the savings in improving the current property will also find interest-only mortgages beneficial in the long run, as the improvements would increase the value of the property.
The extra savings can be deposited into certain bank accounts and used later for children's education.
The savings could be used to clear other debts.
For those buyers who wish to invest in real estate, interest-only mortgages offer a good chance to invest and earn from a good and beneficial piece of property.
Lenders
There are a number of lenders offering different rates depending upon the interest-only mortgage plan chosen. To find the best deal, one needs to compare the rates of lenders in their locality, contact their financial advisors or local banks, consult friends or relatives, and search the Internet.
If you have additional questions regarding your financial options, please call us, and we'd be happy to recommend a tax professional to you. Our web site http://www.mortgageease.com should answer most of your questions, but your personal consultant is only a phone call away: Feel free to call us at 888-744-EASE (3273).
"
.
"The Further You Go, the Behinder You Get": Interest-Only Mortgages Are a Bad Deal!
A combination of banking deregulation, the growth of the mortgage industry, and the recent housing boom has resulted in a proliferation of mortgage products available to prospective home buyers. Conventional fixed and variable interest mortgages, which traditionally have required a 20 percent down payment, have been joined by a number of government-backed and private mortgages requiring little or no down payment and available with or without "points," or lump sums paid up front in exchange for a lower interest rate.
One mortgage product which has become extremely popular all over the US is the interest-only mortgage, typically offering an unusually low interest rate, sometimes as little as 1.5 percent, and many combined with a balloon payment after an initial period. What many home buyers don't understand is that an interest-only loan typically has two interest rates: the one they pay during the life of the loan and the actual interest rate.
Here's how it...
Mortgages > "The Further You Go, the Behinder You Get": Interest-Only Mortgages Are a Bad Deal!
Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans
With the growing interest in real estate purchasing and speculation, more and more lenders are offering "nontraditional" types of mortgages. These include adjustable rate mortgages (ARM) of every shape and size, the more popular interest-only mortgage, and the very dangerous Option ARM mortgage, which can cause the amount you owe to actually increase as time passes. One rapidly growing sector of the lending market is the so-called "subprime" market, which caters to consumers with poor credit records. The subprime market is a profitable one, as lenders offer loans to consumers whose poor payment history targets them as risky clients. Yes, they are risky clients, but the lenders charge fees and interest rates that are high enough to offset the additional risk.
People who are interested in purchasing a home should be careful, however, as many people who should qualify for traditional loans are being pushed into higher-priced subprime loans instead.The subprime market is quite a lucrative...
Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans
Mortgages > Home Loans and Mortgages ? Watch Out for Dangerous Subprime Loans
Offshore Mortgages for Non-UK & UK Residents buying UK Property
Copyright 2006 Nigel Osgood
MORE PEOPLE COULD BENEFIT FROM AN OFFSHORE MORTGAGE THAN YOU WOULD THINK!
If you fall into any of the following categories and are considering buying or remortgaging a residential property in the UK for investment or buy to let purposes, you could be one of them:
(a) Non-UK residents (UK expatriates and Nationals of another country) wishing to purchase/remortgage a property in the UK for investment/buy to let purposes
(b) UK residents (Non-UK domiciled) wishing to purchase/remortgage a property in the UK for investment/buy to let purposes
(c) UK residents but deemed Not Ordinarily Resident in the UK for tax purposes, wishing to purchase/remortgage a property in the UK for investment/buy to let purposes during the period of their UK residency
Properties may be purchased via a UK Regulated Mortgage Contract for any applicants wishing to use a property as their main residence.
Properties...
Mortgages > Offshore Mortgages for Non-UK & UK Residents buying UK Property