Interest-only mortgages are loans secured by real estate and they are very much viable for the first time home buyers, but Alas! most people associate this type of loan to the higher risk, which is not true.
The one good thing about an interest – only mortgage is that it does not require you to pay an interest-only payment, instead you are given an option to pay the lower payments during the initial years of the loan. This is the best option, especially for those whose monthly income is not flat or fixed. It allows such borrowers to pay interest only payments during slim months and pay extra towards the principal in the months when they earn more due to commission or bonus, depending upon the nature of their job.
However, despite the advantages, the cost is the point of concern for many borrowers. An interest only mortgage costs a bit higher than a conventional loan. Beside the cost, there are many lenders who charge some fee to make a loan, and this fee vary lender to lender. So if you ever decide to go for an Interest-Only Mortgage, you must shop around, and find the lender who cost you less fees.
Besides Cost, there is another big Risk associated with Interest only mortgage, and that is, If you pay only the interest rate, each and every month, you will be doing no good no yourself, since at the end of the day you will be owing the same amount of original loan. This is because in an interest only mortgage, the loan balance never increases.
Keep these points in mind. Indeed its you, who have to decide, so all you should do is to carefully examine whether you should go for an Interest only mortgage or not; and if for some reason, you are to opt this, make sure that you are making best out of it, by keeping continuous focus on every payment you make.
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