INTEREST ONLY MORTGAGE

One of the hot loan products in the market is an interest only mortgage. It is not really a new product, but it has received increased attention as it is being made available to more types of borrowers.

Some of the people utilizing interest only mortgages are young homeowners. The reason young homeowners and first time buyers are taking out interest only loans is that they know they should see a rise in their ability to earn as their work experience and earnings increase. For this reason, they lock in a lower mortgage payment for the first five years (or 7) paying only the interest on the loan. After that point, their payments will rise as principal payments will also come due.

Another group who has been jumping on the interest only mortgage bandwagon are investors. As there has been a relatively high rate of appreciation in real estate, coupled with low interest rates (and low returns in the stock market), investors have been steering their money into the real estate market. To get the most bang for the buck and to minimize their monthly outflow in the period of time between when they buy and sell their investment properties, investors have been choosing interest only mortgages.

Interest only mortgages are expected to retain their popularity, but mortgage customers will be scrutinizing them carefully in the future.

Additional Information - Interest Only Mortgage