Interest Only Mortgage

In the current real estate market, there are more types of mortgages available than ever before, several being very new to the market. For most people, owning their home is a goal and will invariably require a mortgage within their life. Therefore, it is recommended that any potential buyer become acquainted with various types of mortgages and when each is appropriate. The modern mortgage industry has become exceedingly complex due to the increase in the number of lending institutions. Let’s take a look at the various interest only mortgage options you may encounter.

Typically, most home buyers apply for traditional mortgages, comprised of additional fees, taxes, high interest rates, and a minimum down payment. Unfortunately, the total of all these extras sum up to a fair additional cost to the already existing loan expense for the property. Given this fact, most home buyers will eventually have the following question: Is it possible to avoid the expense of these all additional fees in the first place?

In most cases, the answer is both yes and no. Mortgages that require little or no down payment, with only a few extra fees, are available to home buyers with low annual incomes. These mortgages, frequently called FHA mortgages, originated from and are subject to rules and regulations administered by the federal government. First time home buyers with low annual incomes are eligible to apply for FHA mortgages, and should do so considering the advantages granted by this type of mortgage – less financial cost over the life of the mortgage.

Another method to bypassing these extra costs may be done by applying for a VA mortgage loan. Only United States veterans, that returned from their tour of duty and performed all their duties honorably, are eligible for special consideration and may apply for this particular type of mortgage loan. VA mortgages are closely related to FHA mortgages, and as such, are subjected to the same standards. VA mortgages are do not typically require down payments (or are very small), are administered by the government, and assign interest rates based on the minimum present in the market.

An interest only mortgage is the last type that is not subject to the majority of fees commonly associated with mortgages. Interest only mortgages are those where the approximately first half of the payment schedule, usually six or seven years, is comprised solely of interest payments. However, after this time frame, the loan will either require a large lump sum covering all principle payments not made during the first half of the loan, or larger monthly payments.

This loan type should only be utilized by home buyers that expect their salaries to increase dramatically in the next few years. Furthermore, the individual should also expect to receive additional bonuses and promotions. This loan type should only be used by individual’s who are do not currently have large incomes, and need help during the first few years of their employment and mortgage life. As with all loans, this type should only be applied for under specific circumstances and done so with care.

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