Interest-Only Mortgages - The Good, the Bad & the Ugly
Quiz time…..
True or False: Does paying extra on an interest-only loan pay down a loan faster than a standard amortizing loan?
If you guessed “False” you are correct!
If you pay extra on any mortgage, you’ll pay it down faster. But if you have a mortgage with an interest-only option and you make the same payments as you would on a standard amortizing mortgage, it will pay down at the same rate as the amortizing loan.
Interest-only loans allow people to pay only the interest or interest plus as much principal as they wish; even extra if they want. But the reason people get interest-only loans is to have the payment flexibility when they need it.
Its important to note that if you pay extra toward your interest-only loan (that is, more than the monthly principal and interest payment), one good thing that happens is the next month’s required payment drops.
Interest-only mortgages can allow flexibility and choice needed by some buyers. However, the pros and cons of this, or any loan product, should be researched thoroughly before committing to any particular one.
For more information, contact MillionSaverHomes.com a local Las Vegas real estate broker at 702.212.3513.
Popularity: 14%