Interest Only Loans Advantages
Borrowers with sporadic incomes can benefit from interest-only mortgages. This is particularly the case if the mortgage is one that permits the borrower to pay more than interest-only. In this case, the borrower can pay interest-only during lean times and use bonuses or income spurts to pay down the principal.
Interest Only Loans
Borrowers like interest only loans because it maximizes affordability by minimizing the lowest monthly payment. Our purchase and refinance lenders specialize in providing low payment 1st and 2nd mortgages for refinancing with offers from 3-4 competing mortgage refinance loan specialists from across the country. Reduce your first mortgage payment by hundreds of dollars or take out a home equity line of credit that only requires you to pay interest when you use the HELOC. Our team will help you compare interest only mortgage options so that you know you are committing to the best loan.
- Cash Out Refinancing
- Lower Monthly Payments
- 1% Start Rate Option Loans
- Debt Consolidation Refinancing
- No Equity Refinance
- Stated Income Refinance
- No Income Documentation Loans
- Non-Conforming ARM, Interest Only
- Government - FHA, VA
- Home Equity - Fixed Rate or HELOC's
- Home Construction Lending
As home prices zoom upward, some home buyers are turning to interest-only home loans. An interest-only loan allows you to pay just the interest on the mortgage for a set period, often the first five, 10 or 15 years. You don't have to pay principal during that time. When the interest-only phase is up, the monthly payments skyrocket as you begin paying principal over the remaining term of the loan. Most borrowers expect to sell the house or refinance the loan before the interest-only period ends. The main attraction of an interest-only mortgage is the lower monthly payment. "It is becoming something that borrowers and Realtors are asking for, because it allows the borrower to afford more house," says Vijay Lala, senior vice president of product development for Countrywide Home Loans.
This is especially true recently, as interest rates have risen from 46-year lows and home prices have gone nowhere but up. Some home shoppers have found to their chagrin that the houses they could afford in June are no longer affordable because of higher rates. Or rather, they found that their dream houses are no longer affordable with regular, fully amortizing loans. Enter interest-only mortgages, which increased in popularity after rates began rising at the end of June.
Consumers Allocating More for Home Ownership
Americans are spending much more to be home owners than ever before, according to a study released yesterday by the U.S. Census Bureau.
In all but one state, Alaska , the amount of family income devoted to mortgage, taxes, insurance, and utilities has risen from an average of 19 percent in 1999 to nearly 21 percent in 2005.
Household incomes have dropped 2.8 percent during the same period.
"It is now much more difficult for first-time home buyers to get into the market, and for existing home owners to trade up," says Mark Zandi, chief economist at Moody's Economy.com. "This decline in affordability is the catalyst for the current sharp decline in housing activity."
California ranked No. 1 in housing costs, with a median home value of $477,700. Other notable findings included:
- New Jersey had the highest monthly housing costs for home owners, at $1,938.
- West Virginia had the least expensive monthly costs for home owners, at $797.
- Hawaii had the highest monthly costs for renters, at $995.
- North Dakota had the lowest monthly costs for renters, at $479.
- Mississippi had the least expensive median home value, at $82,700.
- Among America 's 15 largest cities, San Francisco had the most expensive homes, with a median value of $726,700. Detroit had the least expensive, at $88,300.
- San Diego had the biggest increase in median home values from 2000 to 2005, going from $249,000 to $567,000.
Source: Associated Press, Stephen Ohlemacher ( 10/03/06 )
Question: What is a jumbo loan?
Answer: A conventional loan that exceeds the maximum agency (Fannie Mae, Freddie Mac) mortgage amount guidelines for a conventional loan.
Question: What is PMI?
Answer: This stands for Private Mortgage Insurance. On a conventional loan PMI is required if you borrow over 79.99% of your appraised value. This protects the lender against financial loss if the loan is defaulted.
Question: What is mortgage life insurance?
Answer: This insurance would pay the balance owed on your mortgage home loan in the event of your death during the term of the mortgage.
Question: What is hazard insurance?
Answer: This represents the insurance that protects your investment in your home. It provides compensation to the insured in case of property loss or damage.
Question: What are points?
Answer: Points represent an origination fee charged by the lender and loan discount points sometimes charged on the note rate to lower the interest rate.
Question: What is a buy-down?
Answer: A fee paid to lower the interest rate on a mortgage. The buyer, seller, or any other interested party may pay it. A permanent buy-down would lower the rate for the entire term of the mortgage, while a temporary buy-down lowers the rate for a specified shorter term, generally 3 years or less.
Question: What is an origination fee?
Answer: The origination fee is charged by the lender, and is typically 1% of the loan amount you borrow. This fee is used to cover expenses during the process of the loan.