There are many reasons why a person can be hesitant to apply for a mortgage. One reason is that they still cannot provide the recommended 20% of a down payment. Another common problem is a bad credit standing. Then there is a problem with income. A limited income would leave few options open when it comes to mortgage loans. Some people just opt to wait until they could increase their monthly income. One way to get around it though is to opt for an interest only home loans.
Interest Only Mortgage Loans – Who Is It for?
There are several situations where interest only or IO mortgage loans is a great option. Here are some examples.
We have been talking about those with limited income and how they cannot get great deals because of what they earn. With an IO loan, they get a mortgage loan and yet they would only have to pay a limited amount which would only correspond to the interest of the loan. This period would not last, and the principal would have to be paid eventually, but it is a great way to start.
Another situation where an IO mortgage makes sense is when the borrower has an income that keeps on changing. This would allow making small payments when they have a little money coming in then make large payments when they earn more.
If you are interested in investing your money in other options, then an IO loan makes sense. Instead of your money being tied down in mortgage payments, you can just pay the interest and use the rest of your money in investments which could pay off. Read more at http://www.mortgagebroker247.com.au/
When a borrower has a second mortgage, it might be a good idea to prioritize that. You can just pay the interest on the IO mortgage until the second mortgage has been taken care of.
If you want to buy a good house that is available in the market but your resources do not allow it, then interest only mortgage loans would be a good move. It would let you get a house now and let you work on ways to boost your income.
Be On the Lookout
Like with any other financial product or deal, there are some things that you have to be on the lookout for when it comes to interest only mortgage. You have to be aware of its features and qualities. You should never allow yourself to be misled by supposed features that do not exist.
Misconceptions about IO Mortgage Loans
Here are some of the more misconceptions concerning IO mortgage loans.
It does not need mortgage insurance
The interest is lower
The interest is fixed during the IO part of the term
It is easier to amortize an IO mortgage
It is best to realize that IO mortgage is considered a high risk loan. When it is a high risk deal, the lenders will likely make it even more expensive.