Whats the difference between a normal mortgage payment and an interest only loan?
A normal or typical mortgage payment includes principle and interest (your loan payment), property taxes, hazard insurance (home owner’s insurance) and sometimes mortgage insurance. The principle and interest portion of your payment is used to pay the monthly interest charged and reduce your loan balance each month. With an interest only loan, the above payment description does not include the principle portion. This means that you are only required to pay the interest charged each month and your loan balance is not reduced or paid down each month. Interest only loans are best suited for commissioned or self-employed borrowers who need a flexible cash flow solution and aren’t on fixed incomes. Interest Only loans assume that your home will appreciate in value before you sell your home, allowing you to gain equity through appreciation. Although interest only loans only require you to pay the interest charged, you do have the option of making principle reduction payments as often as you’
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