Interest Only Jumbo Loans
The real estate market in California is not exactly cheap. In fact, it is one of the most expensive states to purchase property in. As you are searching for the perfect loan, we recommend considering the Jumbo Interest Only Loan. It can make the shock-factor for jumping into the California homeownership circle much less shocking.
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Overview for a Jumbo Interest Only Loan
A Jumbo Loan is any loan in an amount that exceeds the conventional loan amount as set forth by Fannie Mae and Freddie Mac. The limit is currently at $400,000. This loan is obviously used to buy more expensive houses. Other than the loan amount limit, the Jumbo Interest Only Loan is pretty much the same as a regular Interest Only Loan. For the first portion of the loan, the borrower pays only on the interest portion of their loan. The second portion of the loan is devoted to both interest and principal. Some lenders allow no penalty principals payments during the interest only period as well; check with your broker to see if that is an option for you.
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Common Questions: Advantages and Disadvantages of the Interest Only Jumbo Loan
- The main advantage of the Jumbo Interest Only Mortgage is that the initial "interest only" portion of the loan offers borrowers very low payments. This leaves the borrowers with more money to use for other purposes.
• A significant disadvantage of the loan is that you will not build equity until you start paying money on your principal. For more information the Interest Only Loan and Equity, see our Interest Only and Equity article.
• Another disadvantage to the Jumbo Interest Only Mortgage is that your monthly payments will significantly increase once you start paying principal in addition to your interest (AKA, the second portion of your term). At this point, many people refinance to a different type of mortgage for a lower interest rate, or sell their home.
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