30 Year Interest Only Loan
Financial situations are like fingerprints; they differ for each person. Since a mortgage is the largest, and most credit effecting financial decision a person can make, it is important that it is tailored to suit the borrowers needs. Lucky for you, that shouldn’t be a problem. There are thousands of mortgage programs out there, and one of the is bound to suit your needs. Keep reading if you are interested in finding out more about the 30 Year Interest Only Loan.
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Overview of the 30 Year Interest Only Loan
This loan is only slightly different from the Interest Only Loan, in that the term period is specified in the title of the loan; the loan lasts for thirty years. A 30 Year Interest Only Mortgage is unique to other mortgages because for the initial portion of their term, borrowers only pay the interest payments on their loan. For the latter portion of the loan, the borrower pays interest, plus the principal. This loan is often used by higher income borrowers that can afford to compensate for this loan’s potentially erratic behavior.
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Common Questions: Advantages and Disadvantages of the 30 Year Interest Only Loan
- A significant disadvantage of the 30 Year Interest Only 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.
• The main advantage of the 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, such as home improvements that will increase the value of the home.
• Another disadvantage to the 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, there are a few options that a borrower may take. Some choose to sell the home and use their economic standing to move up in the market. Others refinance so they can afford to stay in their home.
• Another advantage to this loan is that many lenders allow borrowers to make occasional additional monthly payments that they can apply directly to their principal during the interest only period.
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