What are interest only mortgages?

Interest Only Mortgages - Interest only mortgages are special mortgages set up where the consumer can pay up to 1/2 of the term of the mortgages and are paying for the interest only. In the early years of a mortgage it is mainly the interest, which is being paid with your monthly payments. When purchasing 10 $100,000 homes at 6%, $500.00 per month will be paid on interest on each home and only $100.00 per month will go towards the principal. With Interest only mortgages a person can pay $500 per house per month, which is a savings of $100 per month at the time, allowing them to put a thousand dollars per month into other use such as the money market or stock.

Interest only mortgages are not always as great as they seem. During the time that you are paying only on the interest, the principal is still remaining the same. So if you were to have been paying on an interest only mortgage for say 5 years on a 30 year term, you will still have 25 years left to pay on that term when your principal would then be included and interest will continue. Your payment would jump from $500 per month to maybe $723. And you will not pay anything towards the principal at this point.

A consumer has to hope when paying on interest only mortgages that the house has continued to appreciate thus making it worth more money 5 years after he bought it. Or he will have no equity in the home at all after 5 years of making payments. So as you can see there are advantages and disadvantages to getting interest only mortgages. If you have something that you can really be putting that little bit a month towards and making a profit then it may well be worth it to get interest only mortgages. Be sure to do your research and plan ahead if this is the type of loan that will best benefit you or your business in the years to come. Unless you plan to sell the home you purchase a mortgage is for 30 years and this makes it a long-term commitment.

Interest only mortgages may or may not be right for you and knowing all of the particulars can make this decision a much easier one. It’s not something you really want to rush into. Take your time, weigh all of your options and you may find that interest only mortgages aren’t right for you. By taking the time and learning about interest only mortgages you may save yourself from a financial blunder.

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