Pros and Cons of interest only mortgages - AmericaNowNews.com

Finance

Pros and Cons of interest only mortgages

Mortgage sources said interest-only mortgages, where you pay only the interest and no principal during the loan's first few years, are making a come-back, even though they pushed a few borrowers into foreclosure a while ago. 

What's good about interest-only mortgages is they offer lower monthly payments. The payments can be 30 to 40 percent lower than traditional mortgages, according to the Wall St. Journal's MarketWatch.com.

That would allow borrowers to divert the savings to other investments. On top of that, Sam Goff and Jo Garner, mortgage loan officers for Evolve Bank & Trust, said an interest-only loan enables a borrower to have a real estate asset they can sell without ever making a payment toward the loan's principal, a great situation for someone who doesn't plan to live in the home for very long or for someone with considerable investment capital.

"It is a good option for self employed borrowers and borrowers who generally get a large year-end bonus as part of their compensation," said Garner.

But with every pro, there are also cons to interest-only mortgages.

Since they're interest-only, they typically require higher down payments.

They typically carry adjustable rates. As the rates rise, so do the monthly payments.  

Since you're not paying principal, you're not building equity, either. If home values dip, you could end up upside down on the loan.

If you're in the market for a house as an investment property, or your considering a home you don't plan to stay in for any length of time, an interest-only mortgage may be worth considering. Consult a reputable lender. 

Copyright 2013 America Now. All rights reserved.

  • Most Popular StoriesMost Popular StoriesMore>>

  • Exclusive: Photos from Inside Anthony Sowell's Home

    Inside Look: Exclusives Photos Paint Disturbing Scene Inside Home of Anthony Sowell

    Saturday, May 1 2010 11:19 AM EDT2010-05-01 16:19:26 GMT
    GRAPHIC PICTURES: CLEVELAND, OH (WOIO) - It was one of the most gruesome sights in Cleveland crime history.
  • Six deadly foods for dogs

    Six deadly foods for dogs

    Every pet owner knows a dog can get into just about anything around the house. One woman found that out the hard way when her dog ate a bunch of grapes! Turns out, that's one of the most dangerous foods
    Every pet owner knows a dog can get into just about anything around the house. But these common snacks could be fatal for Fido.
  • Physicians warn against giving melatonin to children

    Physicians warn against giving melatonin to children

    Parents desperate to get their troubled sleepers to bed are turning to synthetic melatonin, which is a supplement sold over the counter. But expert warn it could have adverse effects on child development.
    Many adults turn to sleep aids like melatonin, but now more parents are giving them to their kids, too. We talked to physicians to see what they had to say about how it could affect your child's development.
Powered by WorldNow