The Benefits of an Interest-Only Home Mortgage Loan

Sheryl Landrum
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

When interest-only mortgage loans came on the horizon a few years ago, many borrowers were leery about them. However, there are some good reasons they just might be the best home loans for you.

There are several reasons an interest-only home loan might be best for you. With an interest-only loan you can:
  • Purchase a more expensive home: interest-only mortgage payments are lower than fully amortized ones. A mortgage loan of $400,000 at 6.125 percent interest, fully amortized, gives you a payment of $2,430. A 6.125 percent interest-only mortgage of $477,000 gives you the same monthly payment.
  • Generate more cash flow: A fully amortized loan of 6.125 percent interest at $2,430 is reduced to $2,042 if it is an interest-only mortgage loan. This generates a savings of $388 per month in savings or $4,656 per year.

Who are the best candidates for interest-only home loans?

  • Homeowners who are just starting out.
  • Borrowers with commission or bonus income.
  • Home buyers in high priced markets.
  • Borrowers who want to reduce other higher interest debt.
  • Investors seeking more liquid investments.
Each mortgage loan product you consider when refinancing your current home loan, or when purchasing a new home, comes with different benefits. However, in order to make the smartest decision, take some time and consider your options and talk to a trusted loan officer, tax advisor, or financial planner who can help guide you to the correct mortgage loan program. Remember, the money you save will be your own.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.

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