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Interest only mortgage
An option for the new homeowner ...
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The interest only mortgage is a terrific financial tool for those of you who want to buy more home than you can currently afford. It is also a great financial tool for those of you who want to buy a home with an income that is currently irregular and fluctuates from month to month.
Interest only mortgages typically have a ten-month initial term. During that initial term, the collection of your monthly payments only includes the amount of interest on the loan. No payment toward the principal is included in your scheduled monthly payment.
This allows you, the homeowner, the ability to bite off more than you can chew so to speak. In essence, you can buy a large home, borrow the bulk of the money, and for the first ten months (or the stated term on your specific mortgage since variations do exist), you can simply pay a smaller monthly payment that only includes the interest.
After the established term reaches maturity, your monthly payment changes to include not only the interest, but also, a portion of the principal balance of your loan. Unfortunately, this new monthly payment is going to be considerably larger than your previous payments, so be ready for a drastic difference in your fluid income, unless of course, you make quite a bit more at that time than you did when you first acquired your mortgage. (don)
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