Interest only loans are loans that give you an option to pay just the interest on the loan for an initial period of repayment, say 5 years or 10 years. It also gives the option of paying the interest plus as much principal as you want.
There are many advantages of interest only loans. They offer flexibility to repay as much principle as you want. The amount that is not repaid as principle every month can be reinvested elsewhere at higher returns. The returns can be used to pay off the loan when the loan is amortized after the interest-only period. Or, it can be used to pay off another mortgage or a high interest debt like credit cards. Another advantage is the lower initial payment enables you to qualify for a higher loan amount or another loan.
Interest only loans are suitable for people who are expecting an increase in the income in coming years, and for people whose income is in the form of indefinite bonuses and commissions. It is also good for people who invest the savings made on interest-only loans properly.
However, there are also some risks involved with interest only loans. The interest rate may go up considerably after the interest-only period, significantly increasing the payments to be. This is because most interest only loans are based on adjustable rate mortgages. Another possible risk is people trying to sell the home they mortgaged to repay the loan. The price of the house may not appreciate as much as expected, or it may even come down in value, making the sale and repayment difficult. Loss of income, slump in the economy and other unexpected contingencies are also some things to be considered while going for an interest only loan.
Related Articles of Interest :
-
Pro and Cons of Interest Only Loan
10 August 2010 8:30 PM |
No Comments
Interest only loans are a type of mortgage that provides the option of paying just the interest on the loan for some time of the repayment period. The principle can be repaid after say 3, 5, 7 or 10 years. These loans also allow for...
-
Interest Only Loan Rate
10 August 2010 8:30 PM |
No Comments
Interest only (IO) loans are loans that provide the option to pay just the interest on a loan for an initial period of repayment, say 5 years or 10 years. It also gives the choice of paying the interest plus as much principal as you...
-
Commercial Interest Only Loan
10 August 2010 8:30 PM |
No Comments
Commercial interest only loans are commercial loans that give you an option to pay just the interest on the loan for some initial period of repayment, say 5 years or 10 years. It also gives the option of paying the interest plus as much principal...
-
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...
-
Interest Only Loan Calculators
10 August 2010 8:30 PM |
No Comments
Interest only loans can be fixed-rate mortgages (FRM) or adjustable-rate mortgages (ARM). Though it is generally felt that interest only loans have lower interest rates, this is not true. In fact, they may have higher rates, because the risk is greater in IO loans. When...
-
Interest Only Loan With Bad Credit
10 August 2010 8:30 PM |
No Comments
Interest only loans give you an option to pay just the interest on the loan for an initial period of repayment, say 5 years or 10 years. IOs also give the option of paying the interest plus as much principal as you want. They allow...
-
Interest Only Loan Refinance
10 August 2010 8:30 PM |
No Comments
Refinancing of interest only loans simply means swapping one loan for another. It is an effective way to decrease the debt on existing loans. This is especially beneficial if the current interest rates are lower than the interest rates you are presently paying on the...
-
30 Year Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
One of the reasons for interest-only mortgages becoming extremely popular is because of the time periods on offer for repayment of these loans. The time period of offer may vary from as little as 5 years to 30 years. Now that is almost half of...
-
5 Year Interest Only Mortgages
10 August 2010 8:30 PM |
No Comments
Interest-Only Mortgages, have been popular for decades now due to the primary reason that they allow you to pay only interest for the first five, ten or thirty years of the loan, thereby lowering your monthly payment. Since the interest is paid on a monthly...
-
Interest Only Home Loans
10 August 2010 8:30 PM |
No Comments
As the name implies, interest only home loans are loans that include an option of only paying the interest every month. The principal balance of the loan is paid only when convenient. These loans usually have a fixed or adjustable mortgage rate. An interest free...