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Interest Only Mortgage Rate - Guide to Interest Only Mortgages - What are Interest Only Mortgages, Why Get an Interest Rate Only Mortgage

Understanding an Interest Only Mortgage

pay rates home principle

Buying a home is expensive. You are taking out a loan that you will have thirty years to repay. When considering mortgage payments; you will make payments that will go mainly towards the interest with a small amount going to the principle. If you think you may be the perfect candidate for an interest only mortgage rate, you need to understand an interest only loan mortgage and talk to your lender to see if it is a choice for your home purchase.

What are Interest Only Mortgages

Mortgage loans with interest only payments are home loans that require only payments on the interest for the first five years. Traditional mortgages require homeowners to pay on the principle and interest during the loan terms. When you choose an interest only mortgage, you will pay less for the first five years of your mortgage. This can be a short-term solution to your financial problems; however, you need to pay close attention to the terms of the agreement. Many times after the first term, your interest rate will increase to a new fixed rate to the balance of your loan.

Why Get an Interest Rate Only Mortgage

The main reason to get an interest only mortgage rate is if you have financial instability. These mortgages are good when you do not have set finances. For a short time, you pay lower interest rates. You need to remember to pay on the principle during this time when you have extra income. When the initial rate if finished, you will have a higher interest rate on the principle remaining. You will want to get as much of the principle taken care of as you can during this low payment period. If you are buying a home to fix and turn over, this interest rate is great for you. You will only be paying for a short time so you can take the extra money and put it into the house before flipping it.

Interest only mortgage rates can be helpful when buying a house. They are not right for everyone. You need to consider your needs before you decide to take advantage of this mortgage. This mortgage can help you but you will pay higher interest rates. You may pay lower rates now, but the increased interest rates will have you paying more for your home in the future.

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