Interest Only Loan's

Interest Only financing may seem like a ridiculous type of financing at first glance. In reality, this loan is what millionaire’s finance their homes with. You're probably thinking, "That’s ridiculous. Those fortunate people would just buy their homes out right!" On the contrary, they understand how the world of finance works and they make their mortgage payments work for them. By using the money they would have sent out to their mortgage company, they take that savings and reinvest it. This type of financing will also help you or any buyers or refinances that are held to a certain loan amount because of their Debt-to-Income Ratio or DTI. With an Interest Only loan, you may qualify for a more expensive home. Well, does that mean you are never paying any principle? Yes and no. You have the option to pay down your mortgage balance or to invest your payment. This is one of the good bonuses of interest only loans. Interest Only loans cannot charge interest on principal balance not owed to the lender. SO....if you make an over payment above the interest owed the next month, your payments go down. This can be a real advantage to accelerate a loan repayment schedule or for borrowers that have flexible or commissioned income, you can pick your payment for a true 15 year, 30 year, or interest only payment. This loan is also great for the real estate investor that wants to make the most of the rent they receive. The current Federal Reserve Board Chairman Alan Greenspan has a loan of this parameter. This is the man that sets interest rates at what they are, and he has an ARM on his home mortgage. If he is not afraid of the Adjustable why should you be? 

There are several other factors that play into this idea. A 30 year fixed loan has 360 preset payments and if you over pay, you only knock off the final 360th payment. If you don't live in that home or refinance for the next 30 years, then you have spent money that you didn't get the full bang!

The other determining factor to think of is that the average life of a mortgage is less than FOUR years. That means on average people re-leverage their homes to take out equity, sell their homes and buy a new one or just pay off the note.

This may confuse some about the power of a DOLLAR but one of our friendly mortgage advisors will glad to help you with your best financial decisions.