Interest-only mortgages provide a unique approach to home financing by allowing borrowers to pay only the interest for an initial period, usually between five to ten years. This structure can offer significant short-term financial relief with lower monthly payments, making it attractive for young homeowners or those looking to maximize their early cash flow. However, once the interest-only period ends, borrowers must be prepared for higher payments that include both principal and interest, which can lead to payment shock.
This article from Realty Times discusses both the benefits and risks of an interest-only mortgage helping you to determine if it fits your long-term financial strategy or not. Enjoy the article and call me with any questions you may have or if you have any other real estate needs.
Tim Houterloot - Broker/Realtor
317-997-0165 - Cell
indyhomepro@outlook.com
Source: Realty Times | Repost Houterloot 7/11/2024 -
With traditional mortgages, you make monthly payments that are part interest and part principal. Interest-only mortgages let you postpone repaying the principal portion of your loan for several years — even up to a decade. While this will keep your initial payments low, you may be caught off guard when the interest-only period ends and you’re suddenly facing a higher payment each month.
How interest-only mortgages work
Interest-only mortgages let you pay only the interest portion of your mortgage for a period of time, usually between five and 10 years. This keeps payments early in your loan term low, but it also means your loan amount does not decrease during this period. Once the interest-only period ends, you'll need to begin paying off both principal and interest, which will cause your payments to increase.
After the interest-only period ends, you'll need to begin repaying the principal. You can typically do this in one of a few ways:
Continue making monthly payments: Your payment schedule can remain the same, but the payments will increase now that you are paying back both principal and interest.
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