How does an interest-only loan work?
With the rising costs of new homes, an interest only loan gives you the opportunity to buy a pricier than you could normally afford by delaying the full principle payments for several years. Interest only loans are typically adjustable rate mortgages with an initial period of 3 to 5 years, during which the rates are fixed and your payments consist only of the interest due to the lender. Typically, interest only loans have monthly payments that are 15 to 20% less than that of a fully amortized loan. But be warned: there are drawbacks to interest only loans. During the interest only period you pay no money towards the balance of your loan and you have to prepare yourself for the increase in payment at the end of the interest only term. It’s up to you to weigh out whether or not an interest only loan is right for your needs, although people who expect their incomes to increase more than average over the next 3 to 5 years are usually the best candidates for these types of loans. For more i
