If you are a borrower looking to maximize your monthly cash flow, there are alternative mortgage loan products available for you to increase your cash flow.
Reverse mortgages are one way of creating cash-flow. Reverse mortgages are specifically designed for senior citizens and use the equity in the property to generate monthly income.
One of the most popular home loan mortgage programs to maximize your cash flow is the interest only mortgage. This option allows you to make an interest only payment, usually for up to 10 years. With a normal mortgage you usually make a principal and interest payment. With an interest only loan you are able to only make the interest only portion of the payment. This is great for people who have unsteady incomes such as self-employed borrowers and commissioned borrowers and for real estate investors. With most interest only loan's you can make a payment that is larger than the required interest only payment and everything above the interest only amount will be applied directly towards the principal of your loan and lower your loan balance automatically.
An interest only loan can increase your cash flow by a couple of hundred dollars a month. The disadvantage is that you will not be paying down your mortgage. The biggest advantage is that you will have more available money to you on a monthly basis. This money can be used to pay down your high interest credit cards, and potentially saving you even more money in the long run.
One way to increase monthly cash flow is to take a 40 year mortgage. A longer term directly effects your monthly mortgage payment. Be sure to ask you preferred mortgage professional if you qualify for a forty year mortgage and just how much you can save per month.
Most consolidation loans are simply to increase cashflow.
When taking out a loan to pay off credit cards, try to pay off the cards with the highest monthly payments. This saves the most monthly cash flow and, in most cases, retires the most expensive debt first.
The Pay Option ARM, or Pick-a-payment loan will increase your monthly cash flow the most. This type of loan has a very low minimum payment rate usually based on 1-2%. This payment option does not cover all the interest each month, the difference is added to the balance of your loan. This is called negative amortization. These minimum payments can often decrease your monthly payments by 30% - 40%. The increased cash flow can be used to pay down high interest credit cards, maximize a 401(k) contribution, start a college fund, contribute to other investments or retirement savings, etc.
Another loan program designed to maximize cashflow is the Balloon Mortgage. A common Balloon loan is the 15/30, which is a mortgage that is due in 15 years but amortized for 30 years. With a 30-year amortization, the monthly payment is much smaller than those that are amortized for 15 years.
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