|
Pros and Cons of Interest Only Mortgage Rates
Author David Schneider | Dec 03,2007
|
Interest only mortgage loans allow homeowners to make monthly payments on the interest of the mortgage, for a specified length of time. Once this time passes, the borrower begins making payments on the principal. Monthly payments are low for the first several years, but after the interest only phase is over, payments can substantially increase. There are several pros and cons to interest only mortgage rates. Depending on your financial situation, they might be the best option.
The Pros of Interest Only Mortgage Rates
The biggest advantage of interest only mortgage rates is that the first several years of payments are extremely low because you are only paying the mortgage’s interest. This can be helpful if you are an experienced investor and can make the extra money work in other areas. If your investments pay off, you might be able to make enough money to pay off the rest of your mortgage.
The low payments can also be useful if you have bad credit. This is an opportunity to free up money and make payments on other debt. Improving your credit rating can help you get cheaper car insurance and lower interest rates on other loans. Ultimately, you have the opportunity to improve your financial position.
The Cons of Interest Only Mortgage Rates
The biggest disadvantage of interest only mortgage rates is that you can take a large financial hit when you enter the principal repayment phase. Some people take interest only mortgages because they think that they can make money by investing the monthly savings. Unfortunately, this doesn’t always happen.
Many people take interest only mortgages because they expect to make more money in the future. However, financial situations do not always turn out as planned. Changes in the economy can mean that you don’t get the raise or promotion you expect. In fact, it’s also possible that you will even lose your job. These situations can make it difficult to honor the high payments on the principal.
There is also the problem of discipline. Even when finances work according to expectations, preparing for higher payments can still prove difficult.
Depending on your financial situation and how you handle your expenses, interest only mortgage rates might be the best idea for you. There are several setbacks, though, that can make paying the larger payments in the future very difficult. Interest only mortgage rates are a bit of a gamble. Sometimes that gamble pays off, but sometimes it doesn’t.
Interest only mortgage loans allow homeowners to make monthly payments on the interest of the mortgage, for a specified length of time. Once this time passes, the borrower begins making payments on the principal. Monthly payments are low for the first several years, but after the interest only phase is over, payments can substantially increase. There are several pros and cons to interest only mortgage rates. Depending on your financial situation, they might be the best option.
The Pros of Interest Only Mortgage Rates
The biggest advantage of interest only mortgage rates is that the first several years of payments are extremely low because you are only paying the mortgage’s interest. This can be helpful if you are an experienced investor and can make the extra money work in other areas. If your investments pay off, you might be able to make enough money to pay off the rest of your mortgage.
The low payments can also be useful if you have bad credit. This is an opportunity to free up money and make payments on other debt. Improving your credit rating can help you get cheaper car insurance and lower interest rates on other loans. Ultimately, you have the opportunity to improve your financial position.
The Cons of Interest Only Mortgage Rates
The biggest disadvantage of interest only mortgage rates is that you can take a large financial hit when you enter the principal repayment phase. Some people take interest only mortgages because they think that they can make money by investing the monthly savings. Unfortunately, this doesn’t always happen.
Many people take interest only mortgages because they expect to make more money in the future. However, financial situations do not always turn out as planned. Changes in the economy can mean that you don’t get the raise or promotion you expect. In fact, it’s also possible that you will even lose your job. These situations can make it difficult to honor the high payments on the principal.
There is also the problem of discipline. Even when finances work according to expectations, preparing for higher payments can still prove difficult.
Depending on your financial situation and how you handle your expenses, interest only mortgage rates might be the best idea for you. There are several setbacks, though, that can make paying the larger payments in the future very difficult. Interest only mortgage rates are a bit of a gamble. Sometimes that gamble pays off, but sometimes it doesn’t. |
|
|
Print
E-mail
Del.icio.us
Digg
