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Interest Only Home Loans
Interest only home loans are loans where you pay interest only for a period of time. Having the interest only payment, your monthly payment will be lower than it would be with an interest and principal loan payment . Your interest rate typically is lower than a traditional mortgage, and you have the option of flexible payments.
Interest only home loans allow you to free up cash flow. Lots of investors are using the interest only home loan option buy investment properties.
Why should I consider an Interest only home loan?
On a traditional 30-year fixed-rate home loan most of the payment goes toward interest during the first seven to ten years of the loan. It is not until after over 20 years that you are paying half principal and half interest. Interest only home loans are particularly good for people planning to live in their home for less than ten years. The average homeowner stays in their home between five and seven years. Interest only home loans let you make a lower home loan payment for this period of time allowing you to pay down higher interest debt like credit cards. Depending on your loan amount you could have access to thousands of dollars over the course of several years to invest or reduce your higher interest debt.
But what about building equity in my home?
Many people believe that if you're not paying down the principal you're not building equity. Homes in California have been appreciating up to 20% a year or more. Chances are that even if you're not paying down your principal, you're building equity in your home through appreciation, and at a much faster pace than you could ever pay your home loan down.
But I like the security of a fixed rate home loan…..
There are some great interest only home loans available now that give you the best of both worlds. I have programs available that are fixed for 30 years, giving you up to 15 years of interest only payments, after which you pay principal and interest amortized over the remainder of the loan, keeping your locked in interest rate. Another popular interest only home loan are our pick a payment loans. These loans give you four payments to choose from each month, including interest only, 30 year, 15 year and a minimum payment even lower than the interest only option. After 3 years, you have the option to fix your rate for only $250, giving you the security of knowing you have a fixed rate option available to you. Look at our chart below to see to potential savings.
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Principal & Interest Loan |
Interest Only
Loan |
Minimum Payment Option |
Monthly
Savings |
$100,000
$300,000
$500,000
$600,000
$1,000,000 |
$599
$1,798
$2,997
$3,597
$5,995 |
$500
$1,500
$2,500
$3,000
$5,000 |
$345
$1,035
$1,725
$2,070
$3,451 |
$254
$763
$1,272
$1,527
$2,544 |
These numbers are all based on a 6% APR for comparison purposes with the minimum payment option being a 1.5% pay rate.
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