| INTEREST ONLY OPTION MORTGAGE |
What Is An Interest Only Option Mortgage |
An interest only option mortgage loan is a mortgage that only requires to pay the interest portion of ones mortgage payment. An interest only option is an attachment to another type of loan. Either a fixed rate or an adjustable rate mortgage can have an interest only option. The interest only option allows the appreciation of the home to build equity instead of making payments to reduce the principal. For instance, after making payments in a $300,000 home for 5 years one may have a balance of $280,000. If the house appreciated to $320,000 one would now have $40,000 in equity. An interest only option in the same scenario would have a balance of $300,000 and $20,000 in equity. The difference is that the payment on the fixed rate mortgage would be much higher than that of an interest only as part of the payment is paying principal. With the interest only, one would have paid roughly $7,000 less in payments and would have a much lower payment. In this scenario the buyer is utilizing the appreciation of the house instead of their own money to earn equity. This is a good option in a very strong housing market where the home values are increasing very dramatically and very quickly. We look forward to serving you.
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