As the name implies, interest-only home loans are loans that include an option of only paying the interest every month. The principal balance of the loan is paid only when convenient. These loans usually have a fixed or adjustable mortgage rate.
There are many benefits to interest-only mortgage loans. There are many situations where an interest-only mortgage loan could be best for you.
Here are some of the situations where an interest only mortgage loan might be beneficial to you:
- If you are in a situation where your income is sporadic and would rather have the option of paying as little as possible sometimes and then paying larger amounts when there is more income, for example, a real estate agent or loan officer.
- If you are investing your mortgage payment savings in something else that is low risk, and has a much higher return on your money than your house payment.
- If you are temporarily in a situation where your income will be low for a while but then increase later on.
- If your mortgage is only temporary, for example, an investor looking to flip a property or someone who is working on a fixer upper. It would be good in any situation where it would be in your best interest to keep the payment low as opposed to creating equity in the home.
How much can you save with an interest only mortgage loan? For loan amounts under 500,000 you can usually save around 10% or more off of your mortgage payment. However, that number can vary depending on your individual situation.
An interest-only mortgage loan can be very beneficial because it can help you save money on your payment when there are other things that you would like to invest your money in. It also gives you flexibility when your income is sporadic and you need to make sure that you will always be able to make your payment on time.
