Have you heard that commercial about interest-only mortgages…the one where you’re told about what a wonderful benefit it is to have a low, low mortgage payment and all the wonderful tax write-offs you will receive?
Before you decide to buy now and pay later, that is pay big time later, take a moment to enlighten yourself a bit more about these so-called interest-only mortgages.<\/p>\n\n\n\n
Think about it for a moment. If you just pay the interest in your home, will you ever start paying on the principal, and will you ever earn any equity into your property?
By definition, a mortgage is a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.<\/p>\n\n\n\n
Simplified, that means you borrow money from a financial institution and they essentially buy your house and you pay it back.<\/p>\n\n\n\n
How can this happen if you’re just paying interest? More accurately, interest-only mortgages are a temporary reprieve for paying off a traditional mortgage.<\/p>\n\n\n\n
You may actually be prolonging the inevitable and eventually making it even more costly to pay off your mortgage. With an interest-only payment you’re keeping the principal at a minimum value while continuing to pay interest at 100%.<\/p>\n\n\n\n With a more conventional mortgage, you’d be slowly dwindling down the total interest amount. Interest-only payment periods almost never run for the entire term of the loan which is typically 15 or 30 years.<\/p>\n\n\n\n Depending on the terms of your contract, you could be expected to start paying on the principal in five, seven, or ten years.<\/p>\n\n\n\n Once the interest-only period ends, your monthly payment will go up because then you’ll be paying on both principal and interest. However, keep in mind that in a “down<\/strong>” real-estate market you generally won’t be building equity and making money by doing it this way.<\/p>\n\n\n\n The majority of the money made from investing in real estate comes from an increase in value to the home.<\/p>\n\n\n\n The average person moves every seven years anyway. Gone are the days when people stay in a home for thirty years.<\/strong><\/p>\n\n\n\n Hence, if you anticipate moving before you’ll have to start paying on the principal, then an interest-only payment may be ideal for you. Have you heard that commercial about interest-only mortgages…the one where you’re told about what a wonderful benefit it is to have a low, low mortgage payment and all the wonderful tax write-offs you will receive? Before you decide to buy now and pay later, that is pay big time later, take a moment to enlighten […]<\/p>\n","protected":false},"author":2,"featured_media":34563,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[31,72],"tags":[827],"yoast_head":"\n
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Far too many people are in debt way over their heads because of interest-only mortgages. They took advantage of attractive offers to buy now and pay later.<\/p>\n\n\n\n
Most interest-only payment schedules are offered on Adjustable Rate Mortgages (ARMs), but they can also be found on a fixed-rate mortgage.<\/p>\n\n\n\n
Conversely, interest-only mortgages can be a good thing for some people. For those people wanting to purchase a bigger\/better home for a lower down payment AND who anticipate moving within seven years, the interest-only payment method may be the way to go.<\/p>\n\n\n\n
There’s a great deal of fine print to any mortgage. Evaluate your own goals; be vigilant when reviewing the terms on the loan you’re considering before acting.<\/p>\n","protected":false},"excerpt":{"rendered":"