Access Brokerage, Incorporated- Jim Parker - Exclusive Buyer Agent in Atlanta, Georgia


ACCESS BROKERAGE, INCORPORATED

1634 Rex Drive - Marietta, GA - 30066 - Phone: 770-971-5418 Cell: 770-265-7293 Fax: 770-509-2094

Our clients deserve the best!


How Interest Only Loans work

  • Originally used immediately before the GREAT DEPRESSION, these loans were marketed, and still are, toward the people who get large bonuses or someone who wants a real low payment now, a sophisticated investor and jet setter that wants to divert their money that would have gone toward loan principal to investments and other purposes.
  • Interest-only mortgages also work well for people who plan to stay in their home for only a short period of time, are very disciplined with money, would like to get into a bigger home and impress someone, or anticipate a large annual bonus, or work mostly on commission or otherwise have uneven streams of personal income.
  • Most interest only loans cover a total period of 30 years. The borrower agrees to a lower interest rate for a specific time period (for example, the first 5 to 15 years). At the end of the specific time period, the loan converts to a conventional loan in which the remainder of the loan is paid off over the rest of the loan term in addition to the interest, insurance and taxes you were already paying. This usually means a much higher payment.

  • The interest rate should remain fixed until the loan is required to be paid back.
  • There should be no prepayment penalty.
  • The interest rate may be higher than the typical 30 year conventional fixed rate.
  • The only equity you build is from market appreciation.
  • The longer you stay in the home, the higher the monthly mortgage payments.

    QUESTIONS ABOUT INTEREST ONLY LOANS FOR YOUR LENDER

    QUESTION LENDER'S RESPONSE
    Does the interest rate remain fixed or how will it vary with any index, margin or other factor? ?
    Is there any prepayment penalty? ?
    What happens if I refinance during interest only period? ?
    Will the interest rate be lower when the initial interest only time period expires? ?
    How will the principal balance and mortgage payments be affected if I make random contributions toward my principal loan balance during the interest only period? ?
    Will I or an escrow pay my own homeownerís insurance and property taxes during the loan? ?

    Pros & Cons of Interest Only Loans

    Pros Cons

    Lower monthly payments because you're not paying principal.

    Allows prudent/competent investor to place extra into better returns.

    If market appreciates, you gain.

    Defer larger mortgage payment so you can get larger home now.

    Qualify you for a bigger loan.

    Deduct the entire mortgage payment during interest only period instead of monthly difference in interest.

    You donít build any equity in the ownership of your home in the initial interest only period because you donít pay any loan principal.

    If housing prices drop during the interest-only period, you lose equity & owe more than home is worth.  If you have to sell, you could wind up paying to get out of the loan because you haven't cut into the principal.

    When you refinance your home, will the interest rate at that time be lower when the initial interest only time period expires?

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    Sources:  http://classifieds.dallasnews.com/realestate/story/realmortgage_5-28.1597c37.html

    www.bankrate.com

     


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