Are you looking to buy another investment property? Do you lack the cash flow to pay large monthly mortgage bills? Many buyers want to learn more about great financing to buy a home. This week, Stonebriar Mortgage helps Dallas, TX and California residents understand interest-only home loans. Read on to learn more about various programs and start comparing options. Then, contact our offices when you are ready to start looking.
Interest-Only Home Loan Programs
Many programs are available for home mortgages that offer interest-only financing. It is best to stay up-to-date with program policies, as there are innovative funding opportunities on the rise. Many people remember the awful mortgage crisis in the early 2000s, and are fearful of risks with interest-only options. However, regulations have changed in response to the mortgage problems of the past.
Interest-only mortgages will begin with lower than usual monthly payments and then increase over time. The borrower is only paying off the interest on the loan with these initial bills. This may seem illogical, but interest-only loans offer opportunities to enter the homeowner market at a rate many people can afford. You need to be cautious, and consider whether you can handle the ballooning payments down the line. In the past, banks would approve customers who could not handle this increase. Today, added safeguards are in place that may prevent this issue in the future.
How Interest-Only Home Loans Work
Interest-only mortgages are returning to the market, but remain a very small percentage of new loans approved. A majority of these mortgages come with a 30-year term. The initial ten years of the loan are interest-only payments. These loans can be fixed-rate or adjustable-rate mortgages. The fixed-rate option helps you predict and keep the same payment throughout the entire term. However, it will be harder for you to take advantage of a lower interest rate should one become available. Conversely, you are protected if interest rates rise.
Some lenders charge a higher rate since interest-only loans may be riskier to approve. If you are able, see if you can make payments towards the principle balance of the loan during the interest-only period. This is usually allowable without a penalty, just be sure you inform the lender that the extra pay applies to principle. However, some lenders will charge penalties for trying to pay too large of a balance or the entire loan early.
How to Qualify for an Interest-Only Mortgage
Many people who are successful at securing an interest-only mortgage carry common traits. Lenders typically like to see higher income and credit scores. A larger down payment will also help convince the lender to carry more risk. Your assets will be reviewed, and it is best if you have reserves that can quickly be converted to cash if needed.
Stonebriar Mortgage is here to help homeowners in the California and Dallas, Texas area consider interest-only loans, contact our friendly team today!