The Good And The Bad of Interest-Only Mortgages
Many first time home seekers do not realize how many different types of loans there actually are, but there are some that may be more beneficial than others. One type of home loan you may not be aware of are interest-only mortgages. Let's take a look at some of the pros of cons of this type of loan.
Pros of Interest-Only Mortgages:
- We can start with the pros. With this type of loan, your mortgage payments will actually be a smaller amount per month. This is great for those that cannot afford a high monthly mortgage rate and since you will be saving a good amount, you can buy a larger home if your desire.
- Another good benefit that home buyers do not realize about this loan is that you are still able to build equity. Even if home prices go up, it is still possible. You can also start to make other investments with the money that you save from this type of mortgage.
Cons of Interest-Only Mortgages:
- Time for the cons to this type of home loan. Since this is an "interest-only" loan, it means that there is no money that will be going to the principal amount. This can sometimes result in higher interest rates. You should also keep in mind that paying only interest will be temporary.
- Another downside to this is that, no matter what, you will have to make some choices in the future that involve making large payments. This means you can either sell, refinance, or find a way to make payments that are a larger amount.
Choosing the type of mortgage that is best for you takes time and research. Talk to your lender to find which is best for you based on your home, credit report, income, and other important aspects of a mortgage.