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What Is An Interest Only Mortgage? There are different kinds of mortgages available to a potential borrower or homeowner. There are those with fixed rates and those with adjustable rates. There are second mortgages and third of fourth mortgages. However, with these mortgages, the borrower has to pay both the interest and part of the principal together. If your income comes in the form of commissions, bonuses or freelance work, it will be difficult for you to meet the payments of these standard mortgages. Instead of these standard mortgage plans, why not consider taking out an Interest Only Mortgage. An Interest Only Mortgage is different from all other mortgage types because with intrest only loans, you only pay the interest on your principal loan for the first five to seven or ten years. Payment of the principal amount, either in lump sum or in installments, plus the succeeding interest rates commences after this specific time frame. Principal Payments With Interest Only Mortgages However, borrowers are not confined to paying just the interest rates during the initial years. If you opt to pay part of the principal, you are allowed to do so. Simply inform your loan officer about the details when you make your remittance so that he may deduct your payment from the original loan amount. If you find that you still do not have enough income to make the monthly payments, you can also request that your intrest only loan be refinanced even further. Naturally, if you wish to refinance or extend the term of your loan, expect the interest rates, as well as your monthly payments to increase. An Interest Only Mortgage sounds very ideal but this is not for everyone. This kind or mortgage is suitable for those who earn a minimum amount but get windfalls in commissions or bonuses at the end of the year, or those who expect to be more liquid or financially more stable within the next few years.
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