It's NOT Too Late to Beat Rising Interest Rates
You read it here first! It's not too late to beat higher interest
rates. You can win the mortgage game with an Interest-Only
mortgage. You just haven't heard of one before, or have misguided
impression about this type of plan. People felt that Adjustable Rate
Mortgages might be horrible when they were first introduced. Now you
know better. You will know that interest-only mortgages are
just another tool to use when you are finished this article. Like
lots of tools we don't all use the same tools for different things
we build or fix up. There are lots of different kinds of hammers.
Interest-only mortgages are actually a great problem solver for
those in need of a mortgage for a new home, for those refinancing
that may wish to take cash out to assist with college funding or
retirement planning to name just a few probabilities. An interest-only
mortgage can make the difference in qualifying for home for the
single parent, or for those who feel cash strapped. Great Britain
is a nation where this type of loan has been popular for years.
In fact this type of loan was popular for a short time back in the
1920's here in the United States.
Today's Interest-Only mortgage is different than that of the 1920's.
Interest-Only mortgages today are in many respects simply a more
flexible version of the well known, Adjustable Rate plans already
widely used by homeowners.
There is an agreed upon initial time frame where the homebuyer
pays no principle as a part of the monthly mortgage, the only requirement
is to pay the interest portion, hence the name, Interest-Only mortgage.
The most popular time frame according to industry sources for the
initial interest only requirement is 5 years. After that initial
time frame the payment changes and a homeowner is required to make
full payments of interest, principle and taxes etc.
It is true that financial planners, estate and tax attorney's have
been familiar with them and advising their clients to consider them.
In fact well known and respected financial advisor, radio personality
and author Ric Edelman has not only discussed them but is the proud
owner of one. The product as it exists today has only been available
for about two years now.
Who Can Benefit From an Interest-Only Mortgage?
- Parents looking to get the best school systems and neighborhoods
now, but are short on cash flow and would otherwise settle for
something less than first choice
- Purchaser in need of a jumbo loan
- Corporate and government or military types who are stationed
in any one location for a short period of time
- Persons refinancing so that they can take cash out for college,
for building a retirement nest egg, or supporting aging and infirm
family members*
- Purchaser who wants to have the nice home now and yet wants
to get rid of some other higher interest rate debt
How much of a savings is there in my monthly payment if I go with
an Interest-only mortgage?
To get an idea of the savings realized by the homebuyer, check
out the example below;
30 Year Fixed Mortgage
Interest-Only Mortgage
| Loan amount $200,000 |
Loan amount $200,000 |
| Interest Rate 6.5% |
Interest rate 4.75%(initial time/5yrs) |
| Monthly payments $1231 |
Monthly payments $791 |
| |
Total savings of $440 per month |
Think of what you could do with that
extra $440 per month!
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