LOAN PRODUCTS
Interest Only Loans
One of the biggest questions we faces when our clients call inquiring about interest only loans would have to be: What is it? How does it work? What are the benefits of an interest only loan?
Benefits would include:
· Flexibility of payment. You can Choose each month if you pay interest only or a regular P&I payment.
· Maintain your Tax deduction. Even if you pay interest only you can still maintain your interest deduction on your Federal tax return.
·
Still gain equity. Your house will still gain equity regardless
of your making principal reductions or not. Use your money for other financial
needs other than principal reduction.
How does it work?
An interest only loan is a “piggy back” option to any conventional product available with a mortgage application. You can get an interest only option added on to a 30 year fixed product, or an ARM product, which can be fixed for 1, 2, 3, 5, 7 or even 10 years! Traditionally the interest only option is offered to you for a 10 year period of time, yet depending on the product you choose, your rate may potentially adjust before your interest only period expires. For this reason it is good to think about a few things before inquiring into interest only financing. These would be:
· How long am I going to be in this house?
· How long have I kept my last few mortgages? How often do I refinance?
· Am I looking for payment security? Rate security? Or simply lowest payment possible?
· Can I qualify income and asset wise for this house or would I have to state my income?
· What is the appreciation rate on my current house? How fast will my equity be gaining whether I make interest only payments or pay principal reduction.
One of the biggest common misconceptions would be that interest only just delays the inevitable which is, a higher payoff. Not true, even potentially while maintaining your current balance of mortgage amount borrowed, your house is steadily increasing in value ANYWAY due to currently stable housing markets everywhere today!
The most popular loan we have now is our Smart Choice Loan, which is a 1 month adjustable ARM which allows you to either pay principal and interest OR a less than interest only portion of your payment based on your good credit and equity position. The minimum payment is actually based off a 1% payment due calculation and provides you monthly the option to pay minimum payment, interest only, 30 year P&I or even a 15 year amortization. It truly is the cash flow loan for today, allowing you to pay minimum payment for 60 months.
Call today to see which interest only product will work best for you!
