The biggest potential danger that any one going in for an interest-only mortgage lies in that they may actually be tempted to borrow more than what they could realistically afford. The temptation to own a house, for example, may be so overpowering, that you may forget that interest-only mortgages are interest-only, only in name! You will have to repay the interest and the principal, over a period of time.
One comes across several ads in various media these days offering you the ‘greatest homes’ because ‘you deserve them’. One could be easily mislead by such tempting ads. But is it the reality? Are interest-only mortgage loans so attractive? You should never forget that interest-only mortgages work on certain assumptions. For example, imagine you buy a house based on the assumption that the price of the house would remain the same even after a few years. But your assumption could go all wrong. Prices may increase and in such a scenario; you will have to pay more interest as well as principal. What if property prices come down? In this case, you will actually end up paying more than what you owe!
Another potential drawback of interest-only mortgages is the fact that interest rates are bound to vary from time to time. All over the world we are seeing a reduction in interest rates, primarily due to buoyant markets. But will it remain so? It is as fickle as the weather. What if we go through a depression? Once the interest rates rise, you will have to pay through the nose.
Young executives go in for interest-only mortgages based on the assumption that their career growth will enable them to repay the interest as well as the principal within the stipulated time period. This could be a big mistake. They would do well to remember Murphy’s Law: if something can go wrong, it will go wrong.
These are only some of the dangers that could befall you while going in for an interest-only mortgage loan. You can get vast information on these types of loans through online resources. Better still: consult your personal financial advisor for further clarifications.
Related Articles of Interest :
-
Interest Only Mortgage Pro And Cons
10 August 2010 8:30 PM |
No Comments
Historically, interest-only mortgages have appealed more to rich borrowers. But times have changed. With increasing incomes interest-only mortgages have become appealing to borrowers of every stratum of the society and not necessarily just the upper classes. Interest-only mortgages have their own advantages. For example, you...
-
Interest Only Mortgage Loans
10 August 2010 8:30 PM |
No Comments
One of the great things about interest-only mortgages lies in the fact that you they are not interest-only. You also need to repay the principal! Interest-only mortgage loans have been in existence for a long time, contrary to what some people think. They are loans...
-
Lowest Interest Only Mortgage Rates
10 August 2010 8:30 PM |
No Comments
Interest-only mortgages have been popular for decades now. They are popular for a variety of reasons. They offer you a relatively flexible repayment option to begin with. You can repay the amount borrowed from the lender over a specified period of time. The time period...
-
Interest Only Mortgage Rates
10 August 2010 8:30 PM |
No Comments
Mortgage rates are applied to the principal amount. These rates are decided upon by the mortgage company and depend on many factors like the location of the house, type of house, number of people living in it and its geographical setting. Some borrowers may find...
-
Current Mortgage Interest Rates
10 August 2010 8:30 PM |
No Comments
A mortgage is a loan that is paid back over a set period of time. Taking a mortgage therefore involves paying a certain amount as interest in addition to the principal borrowed. Mortgages can be broadly classified into two types based on the interest rates....
-
10 Year Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
So, finally you have purchased that dream house of yours. Your dream of rubbing shoulders with what you consider your peer group is finally a reality. And how did you buy that house? Well, you have gone in like a brave soul and got yourself...
-
Florida Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
An interest-only mortgage is one in which you only pay back interest with no principal for a certain period of time. After this time period, which is usually five to ten years, the payment increases to include repayment of both interest and principal. Most lenders...
-
Interest Only Loans
10 August 2010 8:30 PM |
No Comments
Interest only loans are loans that give you an option to pay just the interest on the loan for a limited period of time. It also gives the option of paying the interest plus as much of the principal you want. The main advantage of...
-
New Jersey Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
New Jersey real estate market has picked up lately due to various reasons. Mortgage rates are applied to the principal mortgage amount at which, a loan is provided to the borrowers at a fixed or adjustable rate. These rates are decided by the mortgage company...
-
Atlanta Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
Nearly half of the home mortgages in Atlanta are interest-only mortgages. Owing to the price appreciations of homes being much higher than the appreciations in wages in Atlanta and worldwide, people generally search for options to compensate. In such a situation, Atlanta banks came forward...