Interest Only Home Mortgage Loans - Good Or Bad Idea?
Is an interest only home mortgage loan a good or bad idea? This kind of loan is just one of the many different kinds of financing available for your property.
There are many opinions as to whether this is a good idea for the average home owner, with valid points being made on both sides. If you are in the market for a new home you need to consider all the finance options available to you, together with your ability to repay them.
Here are some interest only mortgage loan pro and cons for the person looking to finance a home.
If you are employed full time, single and making a good salary then an interest only home mortgage loan may not be a good idea. That's because you could pay off your loan on a lower rate of interest and in less time on a different kind of repayment system.
On the other hand, you could save a lot of money by only paying the interest. It is possible that if you invested this in a safe investment you would not only have enough to pay off the principle on the mortgage, but would also gain a little capital for yourself at the same time.
This of course is a gamble, but if you have no other financial responsibilities, it's one you might find attractive.
People who work in seasonal employment, like in the tourist industry, may find that paying an interest only monthly mortgage payment allows them the freedom to pay a minimum amount when they are in "off season".
But during the time they are working, they can make accelerated payments off the principle in addition to the interest.
The risk of paying an interest only mortgage loan repayment is that the principle is not being repaid. Unless the price of homes in your area rises, you don't build up any equity in your home.
Paying the monthly mortgage payment on an interest only mortgage could become like paying rent. You don't have the safety net of being able to sell your home to raise cash should you be faced with some emergency in your life.
As a young professional just starting out on your own, this might not be an issue you need to consider. But if you are married and have a family, you should seriously consider the implications of not having the kind of mortgage that allows you to build a financial safety net.
Home equity gives you a form of financial security that can come in handy if you really need to use it. This should always be a consideration when deciding which home loan to choose.
A lower monthly mortgage payment often looks attractive on paper, but consider all the implications carefully before taking the option of an interest only mortgage loan as a way of financing your home.
Copyright © 2005 1 Stop Shopping Online.com. All Rights Reserved.
This article is provided by 1 Stop Shopping Online.com - Home Loans offering you affordable home loan solutions.
There are many opinions as to whether this is a good idea for the average home owner, with valid points being made on both sides. If you are in the market for a new home you need to consider all the finance options available to you, together with your ability to repay them.
Here are some interest only mortgage loan pro and cons for the person looking to finance a home.
If you are employed full time, single and making a good salary then an interest only home mortgage loan may not be a good idea. That's because you could pay off your loan on a lower rate of interest and in less time on a different kind of repayment system.
On the other hand, you could save a lot of money by only paying the interest. It is possible that if you invested this in a safe investment you would not only have enough to pay off the principle on the mortgage, but would also gain a little capital for yourself at the same time.
This of course is a gamble, but if you have no other financial responsibilities, it's one you might find attractive.
People who work in seasonal employment, like in the tourist industry, may find that paying an interest only monthly mortgage payment allows them the freedom to pay a minimum amount when they are in "off season".
But during the time they are working, they can make accelerated payments off the principle in addition to the interest.
The risk of paying an interest only mortgage loan repayment is that the principle is not being repaid. Unless the price of homes in your area rises, you don't build up any equity in your home.
Paying the monthly mortgage payment on an interest only mortgage could become like paying rent. You don't have the safety net of being able to sell your home to raise cash should you be faced with some emergency in your life.
As a young professional just starting out on your own, this might not be an issue you need to consider. But if you are married and have a family, you should seriously consider the implications of not having the kind of mortgage that allows you to build a financial safety net.
Home equity gives you a form of financial security that can come in handy if you really need to use it. This should always be a consideration when deciding which home loan to choose.
A lower monthly mortgage payment often looks attractive on paper, but consider all the implications carefully before taking the option of an interest only mortgage loan as a way of financing your home.
Copyright © 2005 1 Stop Shopping Online.com. All Rights Reserved.
This article is provided by 1 Stop Shopping Online.com - Home Loans offering you affordable home loan solutions.
posted by Gary at 8:23 PM
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