Mortgage Resources

Featured Tools

Loan Programs In Depth Discussions

Loan Info

Company Info

Interest Only Mortgage Choices

 

Interest only mortgage loan programs provide the same features as fixed and variable rate programs, and they additionally offer a lower payment option. With an interest only loan payment option, you pay only the interest portion of the payment but no principal.

Loan Program  Advantages Disadvantages  
First Name:*
Last Name:*
E-Mail:*
Phone:*
Loan Amount:
Loan Purpose:
Loan Program:
Property Use:
Property Type:
Property Value:
Enter Code Shown:*Click for help.
Enter this code in the box below.
* Required
 
Interest Only Programs
  • Several payment options
  • Lower monthly payments
  • Option to pay the full principal and interest payment
  • Interest only payments for 5 -15 years
  • Higher rates
  • Principal loan balance will not decrease during the interest only payment period
  • Payment will be higher for the remaining term
  • Must qualify at the fully-amortized payment of the interest-only rate
  
An interest only loan can be more expensive compared to a fully amortized loan.  Many lenders usually add an additional 1/4% - 5/8% TO THE RATE for the interest only option, but the payment is still less than a fully-amortized loan.   

Since the mortgage payment is interest-only, all of the payment except homeowner's insurance is usually tax-deductible (although you need to discuss this tax facet with your accountant).  You may add principal at any time to your payment, which will result in a lower monthly payment for the remaining interest-only period.  Since your principal balance doesn't decrease over a 5 - 15 year interest-only period, your equity in the property will not increase, except as markeet values increase. 

An interest only mortgage loan is not necessarily the same as a Pay Option ARM loan.  But in the case of both an interest only loan and a Pay Option ARM loan, there is an assumption that the value of the property will increase every year.