Interest Only Mortgage Basics: Understand the Risks
By Louie Latour
If you are a considering using an interest-only mortgage to finance your home, it is important to understand the risk involved with these mortgages. Interest-only mortgages are dangerous because they allow you to qualify for more mortgage than you can actually afford when the interest only period ends. Here is what you need to know about interest-only mortgages to avoid losing your home.
There are advantages to financing your home with an interest-only mortgage, at least initially. Interest-only mortgages give you a low monthly mortgage payment and the largest mortgage interest tax deduction. The thing many homeowners with interest only mortgages neglect to realize is that interest-only mortgages are not interest-only forever at the end of the interest-only period the mortgage lender will add the principle back into your payment and adjust the interest rate. When this happens the monthly payment amount will go up significantly.
Interest-Only Basics
Interest-only mortgages are interest-only for a period of time specified in the loan contract, usually five years. At the end of the interest-only period the mortgage reverts to an adjustable rate mortgage amortized with a term five years less than a typical mortgage. What does this mean for your payment amount? The monthly payment will be higher because you now have five years less to pay back the same amount of loan. Adding insult to injury the mortgage lender will adjust the interest rate to whatever financial index your loan is tied to and add their premium markup at regular intervals.
Interest-only mortgages were intended as a short-term fix to a financial need many homeowners abuse these mortgages because the don t understand them or they think their income will go up enough to support the full payment amount at the end of the interest-only period. The problem comes when their income does not go up and they cannot afford the higher monthly payment and do not qualify to refinance the mortgage. If these homeowners are unable to sell their homes they will lose their homes to foreclosure.
To learn more about your mortgage options and how to avoid common homeowner mistakes, register for a free mortgage guidebook using the link below.
To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of “Mortgage Refinancing: What You Need to Know,” which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
Claim your free guidebook today at: http://www. Adjustable Rate Mortgage - Are the Risks Worth the Savings The Basics of Real Estate Investing Home Mortgage Refinance Loans - There Are Two Basics Types of Mortgage Loans When Refinancing Home Loan Basics Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The Basics
Adjustable Rate Mortgage - Are the Risks Worth the SavingsBy Louie Latour
If you are considering using an Adjustable Rate Mortgage to refinance...
The Basics of Real Estate InvestingBy David Neese
Real estate investing may not be everyone s cup of tea, but some people who have already trie...
Home Mortgage Refinance Loans - There Are Two Basics Types of Mortgage Loans When RefinancingBy Louie Latour
If you are in the process of refin...
Home Loan BasicsBy Sergio Haros
If you re getting ready to apply for your first home loan, you re going to need to understand the home loan bas...
Mortgage Information - Refinancing? Second Mortgage? Home Equity Loan? Understand The BasicsBy Carrie Reeder
A mortgage is usually the biggest ...
Article Source: http://EzineArticles.com/?expert=Louie_Latour
http://EzineArticles.com/?Interest-Only-Mortgage-Basics:-Understand-the-Risks&id=232866
.
