Interest-Only Mortgages And Facts That You Need To Know

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Five Reasons For Interest-only Payments That May Make You Smile

1. Asset Accumulation
   Consider making a cash investment with, the differential, like a CD at an interest rate of about 2% during the five-year term of interest-only payments that have been overlaid on a fixed-rate mortgage. Over this five-year fixed-rate period those regular deposits that you will be making could grow to $7,566. Then when the sixth year of payments commences and the rate climbs to, let's say, 7% you will need to come up with an additional $173 dollars per month to satisfy the debt service. The additional cash needed could then be drawn form the $7,566 dollars affording you a comfort zone of forty-four months. Keep in mind that these figures can fluctuate depending on the interest assigned to the cd and also fluctuating mortgage rates. Keep in mind that you have come out ahead, and secured for yourself, approximately three years or more of payments that are within the same budget levels as the first five years.
   
   
2. Continuing To Invest In The Property Itself
   By using the excess cash that an interest-only loan affords you will be able to invest in up grading and improving the property. Energy conservation upgrades, minor renovations to important features like the bathrooms, kitchen or building a patio or deck will all bring you added value and make your time in the home more enjoyable.
   
   
3. An Education Fund Is A Good Investment Too
   If you are a young family and you know that in the future you will be needing money to pay for the rising costs of a good college education for your kids you will need to have a long term plan and goal in mind. If you were to take the differential and invest early in a college fund you will have given yourselves a good jump-start on this savings program. Even if you do not have more funds to contribute after the five-year interest-only period expires you will have put something away that can continue to accru and accumulate. Depending on the age of your child. when you buy your house. you could have up to fifteen years or more for this investment to compound and mature.
   
   
4. Contributing Funds To You Retirement Plan
   If you are looking to retire soon, and you have already lived in your home for quite sometime and possibly have no children living at home or going to college, refinancing to a new thirty-year mortgage with interest-only terms will give you a substantial amount to contribute to your present retirement fund or other investments for your future. The fact that you have already been paying down on you current loan and that you will need to borrow considerably less now is a great factor to consider.
   
   
5. Your Income Fluctuates Throughout The Year
   If your income levels fluctuate during the year, for any reason at all, having the extra cash to make your payments during the low times, and accelerated payments during the high times, can be comforting. Possibly you own your own business, and the winter or summer months are when you see a seasonal boom in income from a plowing or house painting business, this along with the differential derived from the interest-only loan can be comforting.
   
   

Still Interested In Interest-only Payments?

So, now you can see, that with their typically lower than fixed interest rates, in conjunction with interest-only payments, ARMs represent a way to have the lowest possible monthly payment, and still be able to own your own home. But you should also now realize that there is some risk to undertake in the process.

If you fully understand your current budget, and can project with some degree of certainty what it will be in the future, you do have the ability to tailor an ARM and mortgage plan to your needs and desires. Interest-only, fully amortized or accelerated amortizations are all available to you.

In conclusion; if you need to have additional funds to satisfy other financial concerns such as education, renovation, retirement or other investment opportunities, and you are already looking into Adjustable Rate Mortgages, then consider an Interest-only or Interest-first loan. And, remember, that not only is that vast majority of your payment already comprised of interest, but that only a fraction of every dollar in interest you spend is tax deductible, anyway.

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