Is an Interest Only Mortgage Right for You?

An interest only mortgage is a type of mortgage that a individual pays the interest only for a set clip period of time, state 3 or 5 years. After that, the individual starts paying on the principal plus interest for the remainder of the term of the mortgage (ex. 25 years). During those 25 years, the interest rate can be adjusted once each year.

The problem people will confront is that after the initial five old age of paying the interest only, they will stop up with a larger mortgage payment for the adjacent 25 years. If you're not certain that your income and property value will go on to rise, you might happen yourself in a batch of financial problem when you can't afford your mortgage payment any longer. It takes financial subject to do certain you can afford the mortgage payment after the first five years.

There was a immature married couple featured on a telecasting show who bought a $995,000 home with an interest-only mortgage. Their concerted annual income was a small less than $100,000. They couldn’t afford the home with a traditional 30-year fixed rate mortgage, but they could with the interest-only.

The hubby said that they didn’t have got to worry about being conservative with their money until maybe 15 old age from now. But, right now they were going to dwell it up.

What are they going to make if their income doesn’t increase, one of them loses their job, or they stop up with too much debt and not adequate money at the end of the calendar month to pay it? Unfortunately, this couple and many other people might stop up in foreclosure in the adjacent few old age because they can’t afford their expensive homes.

If you are looking to purchase a home to dwell in for a very long time, then you might be better off with a fixed-rate Fifteen or 30-year mortgage. If you still desire to travel the interest-only route, do certain you are disciplined enough in your finances and are certain that your income will lift so that you can afford the larger mortgage payment after the first 3 or 5 years.