Some homebuyers find that they fall short when it comes to getting a property loan that they can afford. If you have your heart set on a particular home but you are not able to meet the requirements with a traditional mortgage with a fixed rate, you may want to consider interest-only loans.
Home mortgage rates come into play in this type of loan, of course. Homebuyers that can’t afford a traditional loan may find that they can afford an interest-only program instead. This type of advance typically requires a lower monthly installment which is ideal for some people.
There are some things to think about before delving right into this type of loan. When home mortgage rates are the primary factor in the monthly payment, the principal seems to fall to the wayside. This can make paying off the loan in full very difficult.
Principal versus Interest
The principal is the actual amount of the loan without taxes, insurance and interest figured into the mix. If you purchase a home for 220,000 dollars and make a down payment of 20,000 then the loan’s principal would be the difference or 200,000 dollars.
Interest is the additional money that the bank earns over the course of the loan. The total interest paid on the loan depends on the home mortgage rates at the time that you sign the agreement. The interest is figured into your monthly payment as an integral part of the loan.
Interest-Only Mortgages
When you adopt an interest-only mortgage, you do not have to pay on the principal for the first five years of the loan. Some lenders even allow clients to go ten years without paying anything on the principal. The result is a significantly lower monthly payment.
This type of loan is ideal for someone who wants their dream home but does not want hefty monthly payments that go along with it. The interest-only option is also great for people who expect a significant pay increase in the next few years. They already have their mortgage and they can make additional payments to address the principal.
This type of loan is definitely not for everyone. It is important to remember that you will not be building any equity during the time that you are making the interest payments. This means that you will still owe every penny on the principal loan even after making payments for five or ten years. You might as well rent.
Home mortgage rates are valuable tools that can help consumers decide if the interest-only loan is right for them. This type of loan is only for individuals who have the drive and fortitude to make larger monthly payments when they can to reduce the principal.
June 3rd, 2008 at 3:22 pm
VA Refinancing: How Do You Do It?
With many market trends offering beneficial or favorable conditions, more people are looking into the prospects of refinancing their mortgages. If you are veteran you should appreciate the fact that securing a VA-funded refinance is generally a far easier matter than qualifying for a first homeowner’s mortgage.
Not only is the process of refinancing using a VA loan easier there is more than one way to go about it. In fact there are two main options that you may choose from if you intend to refinance with the VA. You may use a VA streamline refinance or a cash-out refinance.
A streamline refinance, also called an IRRL, provides a way to lower your current loan’s interest rate. The cash-out refinance is useful because it allow you to use the equity you have built up with your current VA home loan as a source of extra finances. Those who take this second option may use the money they have “cashed-out” to pay off other forms of debt or put the money in savings.
Each option has its own native benefits. If you have a VA loan you might want to consider these refinancing options carefully.