Interest Only Mortgages is a risky product and does have its disadvantages. Interest Only mortgages are tricky, because they can be misleading as thepayment is very small for the first 1,2,5,7 or even 10 years. Note that for the Interest Only Mortgage you will have a balloon payment for the entire principal balance at the end of the loan term. However, this program may be a good fit for no doc loans for investment property.
Interest only mortgages might be beneficial for people in markets where houses appreciate rapidly and the plan is to remain in the house for only a couple ofyears. Interest only mortgages are available in both fixed rate and adjustablerate varieties, but most interest only mortgages are of the adjustable ratevariety. Since only an interest payment is due, interest only mortgagesusually have a lower monthly mortgage payment than mortgages that requireprincipal and interest payments. For example, if you have taken an interestonly mortgage loan for 5 years you only pay the interest on your mortgage for 5years. The interest only mortgage rate is an adjustable rate determined by thecurrent interest rate. This preset margin will stay fixed throughout the remaining term of the loan while the interest only mortgage rate added to itwill change (generally on an annual basis) with the fluctuation of the currentindex rate. So after the interest only mortgage payment period is over youwill be paying the adjusted interest only mortgage rate and the principal,which will increase your interest only mortgage payments.
Who Benefits From No Doc Loans
Over the years borrowers have had some challenges of acquiring home ownership from tradition mortgage guidelines but we have a portfolio of programs to help many borrowers who fall outside the traditional guidelines and they have come from all walks of life such as:
- Self- Employed borrower who don’t have a full year or self-employment or the traditional 2 years
- Retired Seniors who don’t have a job
- Families that pool money together to buy their home
- Borrowers with inconsistent employment history
- 1099 workers or Independent Contractors
Interest only mortgages usually have an interest only payment option during thefirst 1, 3, 5, 7, or 10 years of the mortgage. Interest only mortgage paymentdoes not mean negative amortization. Interest only mortgage payment loans are generally not long term solutions. Interest only loans for a fixed period oftime. Interest-only loans are the latest tool aimed at offsetting high homeprices. Interest-only loans represent a somewhat higher risk for lenders, and therefore are subject to a slightly higher interest rate. Interest-only loans are popular ways of borrowing money to buy an asset that is unlikely todepreciate much and which can be sold at the end of the loan to repay thecapital. Interest-only loans helped homeowners afford more home and earn more appreciation during this time period. Interest-only loans may turn out to be bad financial decisions if housing prices drop, causing those borrowers to carry a mortgage larger than the value of the house, which in turn will make it impossible to refinance the house into a fixed-rate mortgage, but they can be perfect for no doc investment loans.
It is important to keep in mind the nature of interest only mortgages. “Although interest only mortgages play a vital part in the mortgage industry, often providing the only means for first time buyers to hold the key to theirown front door, misusing this type of loan is counter-productive. A sample ofthe 3 payment options on a loan amount of $250,000 would be:Minimum Amount Due $804, Interest Only Mortgage $989, 30 year payment $1,304, 15 year payment. Insummary, an Interest Only Mortgage Loan can save you thousands of dollars andpossibly earn you thousands more with the right diversified investments overtime. An interest only mortgage loan gives people the tools necessary tomanage their debts as carefully as they manage their assets. 30 year interest only mortgages typically come with a ten year (often referred to as a 30/10year interest only loan) or fifteen year fixed (30/15) interest only period. These are best for people who: Are very focused on money management and want to reducetheir monthly mortgage payment, they also don`t intend to be in their homes more than a few years Interest only mortgages and loans as the name suggests, means you payinterest only for the first three, five, seven, ten years of the loan, thereby lowering your monthly mortgage payment by quite a lot.