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What does it mean to have an interest only mortgage?Well, you only have pay the interest for the first five
or ten years.After that period is over, you pay the principal. The purpose of this program is to lower your
payments for the first few years. As new owners there are usually more expenses than the usual. Thus, this
can make your home much more affordable. You can afford a much more expensive house than you would have with
a traditional mortgage. Interest only mortgages are powerful tools, greatly extending your buying power.
Why would you get an interest only mortgage? Most people assume that their salaries will increase over time.
You expect to make more money ten years from now. You would not have to wait ten years to buy the home of
your dreams. It will have lower monthly payments early in the loan, because you are not paying any
principal. Thus, it can make a more expensive home
affordable in the short term. You can start enjoying your home now and pay for it when you can afford it.
There are drawbacks to this loan. While paying only the interest for that first five or ten year period you
will not build any home equity. Your payments are like rent. You pay, but you do not really own any of your
home. You start to build equity later, when you start to pay principal and interest. You do have the option
of paying some principal during
this period and start to build some equity. But, it does make it difficult to build equity in your home.
It gives you more spending power, but you do need to be careful. If your salary does not go up as much as
you expect, you still will have to start paying the principal after the specified period of time is over. It
will not wait for you! If you change careers or get laid off, it could put you in a difficult situation. It
is easy to get into trouble with this type of mortgage. But, if you are confident in your career and your
earning potential, this would be ideal option. An interest only mortgage takes
the waiting out of the equation. You can move into the home of your dreams today, if this is what you want.
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