Interest Only Mortgage Choices
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Interest only mortgage loan programs provide the same features as fixed and variable rate programs, and they additionally offer a lower payment option. With an interest only loan payment option, you pay only the interest portion of the payment but no principal.
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| Interest Only Programs |
- Several payment options
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at the interest only payment
- Option to pay the full principal and interest payment
- Interest only payments for up to 10-15 years
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- Higher rates
- Principal loan balance will not decrease during the interest only payment period
- Payment will be higher for the remaining term
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| An interest only loan can be more expensive compared to a fully amortized loan. Many lenders usually add an additional 1/8% - 1/4% TO THE RATE for the interest only option, but the payment is still less than a fully-amortized loan.
Interest only payment loan programs allow you to qualify at the starting interest only payment. This gives you more buying power and a lower monthly payment compared to an amortized loan. You pay interest based on your principal balance. On an interest only loan, your principal balance does not decrease, therefore, you pay more interest with this option.
An interest only mortgage loan is not necessarily the same as a Pay Option ARM loan. But in the case of both an interest only loan and a Pay Option ARM loan, there is an assumption that the value of the property will increase every year.
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