Interest Only Home Mortgage Loans - Good Or Bad Idea?
Gary Gresham
Opinions vary as to whether an interest only home mortgage loan is a good idea for the average home owner, with valid points being made on both sides. If you are in the market for a home you need to consider all the finance options available to you, together with your ability to repay them.
Here are some interest only mortgage loan pro and cons to look at both sides of this kind of financing.
If you are employed full time, single and making a good salary then an interest only home mortgage loan may not be the best financing for you. That's because you could pay off your loan at a lower rate of interest and in less time with a different kind of loan program.
On the other hand, you could save a lot of money by only paying the interest. It is possible that if you invested this in a safe investment you would not only have enough to pay off the principle on the mortgage, but would also gain a little capital for yourself at the same time.
This of course is a gamble, because how many people will actually invest the savings? However, if you have no other financial responsibilities, it's one you might find attractive.
If you work in seasonal employment, like in the tourist industry, you may find that paying an interest only monthly mortgage payment allows you the freedom to pay a minimum amount when you are in "off season".
But during the time you are working, you can make accelerated payments off the principle in addition to the interest.
The risk of paying an interest only mortgage loan repayment is that the principle is not being repaid. Unless the price of homes in your area rises, you don't build up any equity in your home.
Paying the monthly mortgage payment on an interest only mortgage can become like paying rent. You don't have the safety net of being able to sell your home to raise cash if you are faced with some emergency in your life.
As a young professional just starting out on your own, this might not be an issue you need to consider. But if you are married and have a family, you should seriously consider the implications of not having the kind of mortgage that allows you to build a financial safety net.
Home equity gives you a form of financial security that can come in handy if you really need to use it. This should be a consideration when deciding which home loan to choose.
A lower monthly mortgage payment will always look attractive on paper, but consider all the implications carefully before taking the option of an interest only mortgage loan as a way of financing your home.
Copyright © 2005 Credit-Repair-Facts.com All Rights Reserved.
About the author:
This article is supplied by http://www.credit-repair-facts.com where you will find credit information, debt elimination programs and informative articles that give you the knowledge to correct your own credit and credit report. For more credit related articles like these go to: http://www.credit-repair-facts.com/articles_1.html
The latest information and news on Mortgages:
Saudi Arabia?s Mortgage Law to May Double Market Size, NCB Says (Bloomberg)
Feb. 8 (Bloomberg) -- Saudi Arabian property market may double in size by 2015 if a planned mortgage law is put into effect, NCB Capital said. ?A timely implementation of the mortgage law would further support a sustained take-off in the real estate space,? chief economist Jarmo Kotilaine said in an...
Mortgage Bankers Association Forced Into Short Sale: Today's Outrage (TheStre...
How bad is the mortgage crisis?It's so bad that the Mortgage Bankers Association had to sell its headquarters for less than it owes.
State sues Woodridge mortgage company over deceptive marketing (Daily Herald)
Attorney General Lisa Madigan filed lawsuits against two mortgage brokers, accusing them of using unfair and deceptive marketing practices to solicit seniors for reverse mortgages.
Mortgage group has mortgage trouble (St. Louis Post-Dispatch)
If there?s any group that should be wise to the dangers of too much debt, it?s the Mortgage Bankers Association. The Wall Street Journal reports today, however, that the association took a big loss on the sale of its office building.
FTC Proposes Rule That Would Bar Mortgage Relief Companies from Charging Up-F...
RISMEDIA, February 9, 2010?The Federal Trade Commission (FTC) moved to protect distressed homeowners from the promoters of bogus foreclosure rescue and mortgage modification services by proposing a new rule that would forbid companies to charge up-front for these services. Instead,?
Yahoo! News Search Results for refinance
Leonard Lucas of Love Funding's Boston Office Closes $3.8 Million Refinance L...
Boston, Mass., Feb. 8, 2010? Love Funding today announced that its Boston office secured a $3,829,500 refinance loan for a not-for-profit elderly apartment complex located in Trujillo Alto, Puerto Rico. Leonard Lucas, First Vice President with the national mortgage-banking firm?s Boston office, orig...
Village Council working to refinance two bonds (The Manchester Enterprise)
Although the process is extremely early in development, the Manchester Village Council is in the process of finding ways to save money over time for the community via bond refinancing.
Mortgage insurance won't last forever (Bankrate.com)
Dear Dr. Don, I currently co-own a house, but will soon refinance so I can buy out the other party's interest in the property. We (me and the other party) have a conventional loan but I am getting an FHA loan to refinance.
Aussie power plants face US$19b funding headache (Business Times (Malaysia))
SYDNEY: Australia's electricity sector faces a A$22 billion (A$1 = RM2.98) headache as it seeks to refinance debt over the next two years, with uncertainty over efforts to put a price on carbon pollution hurting investment, ratings agency Fitch said yesterday. About 80 per cent of the Australia's po...
Aussie power plants face US$19b funding headache (Business Times (Malaysia))
SYDNEY: Australia's electricity sector faces a A$22 billion (A$1 = RM2.98) headache as it seeks to refinance debt over the next two years, with uncertainty over efforts to put a price on carbon pollution hurting investment, ratings agency Fitch said yesterday.