Home

Interest Only Mortgage Choices

 

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.

Loan Program  Advantages Disadvantages  
First Name:*
Last Name:*
E-Mail:*
Phone:*
Loan Amount:
Loan Purpose:
Loan Program:
Property Use:
Property Type:
Property Value:
Enter Code Shown:*Click for help.
Enter this code in the box below.
* Required
 
Interest Only Programs
  • Several payment options
  • Lower monthly payments
  • Option to pay the full principal and interest payment
  • Interest only payments for 5 -15 years
  • Higher rates
  • Principal loan balance will not decrease during the interest only payment period
  • Payment will be higher for the remaining term
  • Must qualify at the fully-amortized payment of the interest-only rate
 
An interest only loan can be more expensive compared to a fully amortized loan.  Many lenders usually add an additional 1/4% - 5/8% TO THE RATE for the interest only option, but the payment is still less than a fully-amortized loan.   

Since the mortgage payment is interest-only, all of the payment except homeowner's insurance is usually tax-deductible (although you need to discuss this tax facet with your accountant).  You may add principal at any time to your payment, which will result in a lower monthly payment for the remaining interest-only period.  Since your principal balance doesn't decrease over a 5 - 15 year interest-only period, your equity in the property will not increase, except as markeet values increase. 

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.