Fixed Rate Interest Only Mortgages
Posted on 22. Jul, 2009 by admin in Mortgages
A fixed rate interest only loan is a mortgage that allows the buyer to lock the interest rate for the term of the mortgage. This type of mortgage can actually allow you to buy a home that you couldn’t otherwise afford. Like with any other loan, this type has some good points and some bad ones.
One of the advantages to this type of loan is that your payments for the first 10 or 15 years will be all interest payments. And, because you’ll only be paying interest, your payments will be much lower than if you were making a regular mortgage payment.
But, because you are only paying the interest, you won’t be building up any equity in your home at all. Another downside to purchasing a home with a fixed rate interest only mortgage is that once the initial period of only paying the interest is over, your payments will significantly increase.
The remainder of the payments for the term of the mortgage will include both interest and principal. If you get this type of mortgage, it’s a really good idea to pay more than just the interest even though you don’t have to. The more you pay toward the principal the less you’ll owe in interest and at the end of the interest only term you’ll have some paid on your balance.
