Interest Only Mortgage: What is it and what are the benefits and the warnings?
Interest-only mortgage loans are like regular home loans but instead of paying monthly principal and interest on the loan, only the interest is paid for the first five or ten years; usually the term of the loan is 30 years*. Interest-only mortgages provide a popular way for homeowners and investors to take advantage of a cheaper and more affordable mortgage option. By only paying the interest on this mortgage loan, the homeowner or investor can invest – what would be their principal payment – in stocks, savings, or a small business. The hedge is the investment will outperform a standard mortgage loan for the first 5 to 10 years. And after the 10 years is up, the interest-only mortgage loan holder will have the money to refinance or pay of the mortgage in a lump sum. With that said, why should the prospective home buyer/homeowner or investor sink his discretionary income into the principal of a standard mortgage loan when he can instead use that principal as a better investment hedge ag
