Mortgage loans have become extremely popular with consumers through out the world. One of the key reasons behind its popularity is the fact that with more and more lending agencies coming into the real estate scenario the advantages and benefits associated with such loan program are becoming pretty attractive. Interest only mortgage rate is one such advantage that encourages consumers to take up such loan enthusiastically. A mortgage becomes interest only when you have to pay back only the interest and not the principal amount for a particular period of time. It means that your scheduled monthly payment encompasses the interest only. The period of such interest only payment generally lasts for 5 to 10 years.
Accordingly the interest only mortgage rate also differs from the usual FRM or ARM loans. As the name itself suggests the payment will not include any repayment of principal loan amount. You have to pay only the interest in accordance with the interest only mortgage rate. This means that the balance amount for the loan will remain unchanged if you choose to exercise the interest only option.
However if you want you do have the right to pay the principal at any point of time during the tenure. Interest-only mortgages are suitable for those who need to have a lower initial payment structure. When you decide on a suitable interest only mortgage rate and go for either a FRM or an ARM, the monthly mortgage payment will decrease if you make an extra payment in any month. This is the advantage of an interest only option as some borrowers find it quite attractive.
The interest only mortgage rate and its associated payment terms offer the consumer a lot of economic flexibility in the early years of the loan. In fact it is up to your discretion to decide whether you want to pay the interest only or if you like to pay the principal amount as well. However it is important to note that once the introductory period gets over, you have to pay back the original amount in relatively less time thereby making the entire payment structure swell.
Generally the interest only mortgages have adjustable mortgage rates. This means that the monthly payment as well as the interest rate will vary over the loan duration. Such variation can be as frequent as once a month or else it can adjust in every 3 to 5 years. For such ARM interest only loans the interest only mortgage rate gets adjusted monthly after the introductory period. Typically the interest rate adjustment tenure extends from 6 months to once a year. Try to make sure that you do not face negative amortization or payment shock once your interest only period gets over.
Negative amortization means that you might not be able to cover all of the interest through your monthly payments and as a result the unpaid amount is added to the original amount borrowed. For this you need to ascertain that you have the best interest only mortgage rate so as to save you from such disastrous effects later in the process.
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