What Is an Interest-Only Home Equity Loan?
When considering types of home equity loans or lines of credit, it is important to weigh many different factors. Arguably the most important is the type of repayment required. An interest-only home equity loan requires the creditor to pay back only the interest accrued on the loan for a certain period of time designated by the lender. While the lower payment along with the tax-deductible mortgage interest is appealing, the drawback to an interest-only home equity loan is that no equity in the home is built during this time. The structure of, and fees associated with, home equity loans can vary widely. Typically, a loan payment is comprised of principal and interest. Payments toward the principal of the loan pay back the actual amount borrowed, while the interest is the fee that the lender charges to loan the money. In an interest-only home equity loan, a debtor must pay back only the interest charged by the lender. This can be tempting to a borrower since no principal payments are requ
