16 Oct Interest – Only Loans

Our clients have been asking many questions lately about fixed and adjustable rate Interest-Only Mortgages. Fannie Mae and Freddie Mac have been innovative
in developing new mortgage vehicles; Interest-Only Loans being one of the recent additions.

In an Interest-Only Loan the borrower’s monthly payment includes only interest, real estate taxes and applicable homeowners insurance. The payment is
lower than that of a typical mortgage because the money that would normally go towards principal is not included. This makes Interest-Only Loans a
great way to minimize your monthly payment.

But what about the principal balance?
Borrowers have the option to pay or not to pay for a set number of years, generally 10, depending on the terms of the loan. Homeowners can make extra payments towards principal as they see fit.

Interest-Only Loans can be used to refinance or purchase a home. To qualify, borrowers must have good credit and at least 5% in equity or down payment.

Great candidates for Interest-Only Mortgages include:

  • Commissioned salespeople or others with variable monthly income
  • Young professionals, like doctors in residency, who foresee a significant increase in earning
  • Business owners who may have seasonal or varied income
  • Real estate investors