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Interest Only Mortgage
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By Tuan Pham

Within the past several years we have witnessed an unprecedented surge in home prices in the USA, and as prices go up, it becomes increasingly difficult to finance real estate purchases. When you apply for a loan, the mortgage lender wants to ensure that you can make your monthly payments, so they compare your average monthly income to the amount of your payment. If the mortgage payment is too high, you will probably get turned down for the loan, even if you have excellent credit.

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Lenders recognize this problem, and in order to make it easier to qualify for a mortgage, they sometimes offer what is known as an interest-only mortgage. The way it works is that your monthly payment includes only the interest you owe, without any additional principal payment. With an interest-only mortgage you can qualify for a bigger mortgage, and afford to buy a more expensive house.

For example, if you borrow $200,000 with a typical payment schedule, you will pay about $1,200 per month on a 6 percent loan. With an interest-only mortgage, your monthly payment will be just a thousand dollars saving you about two hundred dollars a month.

Something to consider

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This entry was posted on Thursday, September 14th, 2006 at 2:23 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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