It doesn’t matter if you are a first time buyer, someone who plans to be in the house for only a short time or an investor. Either way, you should choose the proper type of mortgage for your needs. An interest only mortgage may, or may not be the proper choice for you.
Here is how an interest only mortgage works. As the name implies, you pay only the monthly interest on the loan. You do not make any payments towards the principal. The loan is structured for a specific time length. Typically these mortgages are for either five or seven years. But it sometimes can be longer. At the end of the time period, you will need to make a choice. You can refinance or pay it off.
There are many benefits to an interest only mortgage. First, your payment will be less. And if you think your income will be higher five or ten years down the road, it may make sense for you. This will allow you to get a nicer homer, and either refinance to a conventional loan later, or move to a different home. You can also deduct the full interest on the loan from your taxes. But the new proposed tax plan may change that. But remember, when the interest only mortgage ends, your payment will rise. Possibly significantly higher. Also, we do not know what the interest rates will be in five or ten years.
An interest only mortgage may be good for you if you think you will have a higher income a few years down the road. Also, if your income varies month to month, you can pay just the interest some months, and in good months, there is nothing to stop you from making a payment towards the principal.
If you would like to discuss your options, call Bunny and Art Reiman, Realtors. Our number is 732-598-7700. Or visit our web sites www.BunnyandArt.com www.55PlusInOcean.com or www.55PlusinMonmouth.com .