Recently there has been a lot of press around "non traditional" loans, including interest only loans. Many people are worried that people might get themselves into trouble with these types of mortgages. As with any type of mortgage, there are situations where an Interest Only loan is the right fit for a particular situation.Many types of mortgages include interest only options. You can get an interest only loan that is a fixed interest rate for 30 years, or choose one with a 1% or even lower minimum payment option as well.
Property rehab investors love Interest Only Mortgages as they typically plan on keeping the property for a short time while they renovate or replace the home.
I always recommend that if you plan on keeping a property or mortgage for 3 years or longer, not to get involved with an interest only mortgage.
An interest-only mortgage might be a good fit for someone whose income is mostly in the form of infrequent commissions, bonuses, or investment cashflow.
Another scenario which may be good for an interest only loan is for someone who will invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and who is confident that the investments will make money to off-set the risk involved with this type of mortgage.
Mortgage loans with "Interest Only" features are often used by home buyers who look to buy more home with a smaller monthly payment. Because "interest-only" mortgages require repayment of only the interests accrued for the prior month, and no repayment of the principal portion is required, home buyers can qualify for a bigger loan amount with the same monthly payment.
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