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Interest-Only Mortgages and Loans

Interest-Only Mortgages

 

Interest-Only Loans

Consider an interest-only mortgage if you are willing to assume a lot of risk to buy a property you will keep only a short time and “flip” for a quick profit.

 

Interest-only loans are a new product, created for buyers eager to obtain mortgages in high-cost housing markets.

In the early years of an inter­est-only loan, monthly payments go towards paying back only the interest that is owed on the loan. Payments are low compared to a fixed-rate loan for the same amount. But after a predetermined period of time, monthly payments increase dramatically as the loan-holder begins to repay the principal of the loan. Interest-only loans, like balloon loans, are generally regarded as risky. There might be times to consider one, such as when you are certain you will hold a property for only a short time before selling it for a quick profit.

Consider an interest-only mortgage if you are willing to assume a lot of risk to buy a property you will keep only a short time and “flip” for a quick profit. However, many financial experts warn against interest-only loans because of the problems they can cause in the future.

 

 

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