What is an interest-only loan and why would I want one?
You are hearing more and more about these types of loans, as more and more lenders offer this in their collections of products. The attraction of this loan is that you can buy much more house. With this type of loan, you pay only the interest on the mortgage for a set period of time, usually 5 to 7 years. You may pay towards the principal at any time, but at the end of that original period, you are required to start paying off the principal in the remaining years left on the loan. This means that your payments will go higher. You can also choose to payoff the mortgage in a lump sum or refinance the balance. This loan is not for everyone, as there are risks. The higher payments may be a hardship. If your house loses value, you may end up trying to sell a home when the value is less than your loan balance.
