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interest only loans are they a good option when you are low on cash? is it like an ARM. what happens when it comes do?

by sling4kavalec999 from , California. Feb 16th 2017 Reply

William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,727 contributions

The concept of Interest Only (I/O) loans is that I/O loans allow you to purchase a higher priced home but have a lower payment since you are only making interest payments.. In all reality, the loan pricing for these types of loans is actually higher than some fixed rate products.. These loans are only offered through portfolio lenders and present a greater risk for the lender.. so they are priced accordingly.. but an ARM is a conforming loan product.. with an ARM, in most all cases, you would have a lower "fully amortizing" payment than a I/O loan payment.. Are they a good option? Sometimes, but each scenario is different, so it's hard to say if it's better for you.. Also, Most all I/O loans are ARM's.. Meaning in the first 3 to 7 years, the rate is fixed, but then the rate will adjust each year.. Additionally, the I/O period only lasts for 5 to 10 years.. after that, your loan becomes fully amortized, meaning you will have to start paying on the principal as well as the interest. If you would like me to look at your specific scenario, feel free to call/email, and i'd be happy to assist. . I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Feb 16th 2017
Larry Gray (lgray_312_247)
#594 ranked lender in California - 1,139 contributions

Interest only loans tend to be something most experienced, knowledgeable and conscientious mortgage consultants and planners will not advise for most people. People have used them in the past simply to have a lower payment, but it may not have been in their best interests. On occasion they can be helpful when someone knows they are going to keep the loan for a temporary period of time and as an investor they have something positive in mind for using the principle they would have to have paid on the home loan. Of course, it is important one review and compare options and this might be an option for some people. If one simply needs more cash flow for a period of time, sometimes it is better to select a 3/1 to 7/1 ARM in which you are paying down principle as you will get a far better rate than for your fixed loan. Interest only loans can turn into a much larger payment of principle/interest (20 year loan) after the first 10 years generally allowed for paying the interest only option.

Feb 17th 2017
Michael Diaz (sincityloandr)
#60 ranked lender in Nevada - 66 contributions

It really depends on how long you plan on keeping the house. I would say look at our 5 year fix interest only option. It will stay fix for five years and during that point you could decide whether you will be selling or just refinance at the current market. When it adjust it will be tied to a margin and index. Contact me for more info if you still have more questions.

Feb 19th 2017
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