Get the facts about interest only mortgage rates. Here are the things you need to know before you consider this type of loan.
Keep in mind that when you are making interest-only payments, you are not building equity in your home. So, although your payments are lower with interest only mortgage rates, you will have nothing to show for it at the end of the interest-only period. Essentially, you will own nothing because all of your money will have gone toward interest. This can be an obstacle if you ever want to take out a home equity loan or line of credit. The equity you have in your home can get you considerably lower rates on loans for debt consolidation, home renovation, or other purposes, and interest-only mortgages delay the accumulation of equity. Consider this before you sign up to receive interest only mortgage rates.
You must be aware before getting interest only mortgage rates that the interest-only payment period on these loans do not last forever. Eventually, higher payments that include principal will kick in. The interest-only period usually lasts from five to ten years. With most interest only mortgages, you will have 20-25 years to pay the principal after the interest-only period expires. This means you will have to pay down the principal faster than you would with another type of loan. Make sure you are equipped to handle these higher payments before you consider interest only mortgage rates.
As you look into interest only mortgage rates, remember that you are taking a large risk on the performance of the housing market. If the housing market takes a hit during your repayment period, you could end up "upside-down" in your loan, meaning you will owe more on your home than it is worth. Thus, if you ended up in a financial bind, you could not even cover the costs of your home by selling it.
