Interest Only Refinance Mortgage
California is known for its individuality; from populations, to lifestyles, to landscape, they have it all. The selections of mortgage programs is just as eclectic. Every person is different, and so it makes sense that every person’s financial situation and ideal mortgage should be different. If you are interested in refinancing for a mortgage that suits your needs better, keep reading to find out more about the Interest Only Refinance. It may be just the mortgage for you.
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Overview of the Interest Only Refinance Mortgage
A refinance is a brand new mortgage that takes the place of your existing mortgage, and can come with whatever terms you qualify for. Many people choose to refinance their existing mortgage for an Interest Only Loan. An Interest Only Loan is a loan in which you spend the first predetermined period of the loan paying only on the interest portion of the loan. In the second period, you also pay the principal.
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Common Questions: Advantages and Disadvantages
- The main advantage that comes with refinancing to an Interest Only Loan is that your initial monthly payments will be smaller. If you need to free up some of your cash for other purposes, but don’t want to have to sell you home, this may be a good option for you.
• Of course, the main disadvantage to refinancing to an Interest Only Loan is that you will not build any further equity on your home. Since the entire financial purpose for owning a home is to build equity, this can be a major problem. The good news is, many lenders offer a solution to this problem. Many lenders accept optional principal payments in conjunction with the interest only payments. Although some lenders charge a fee for this service, many others have programs specifically designed to allow you to do so. This particular plan works well for borrowers whose income fluctuates from month to month. When their income is lower, they may pay the low interest only payment, but when it is higher, they have the option of paying on the principal as well.
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