Myths About Interest-Only Mortgages

Let's get one thing straight. There is no reason to be afraid of an interest-only mortgage. In fact, an interest-only mortgage can work to a buyer's advantage and, quite frankly, it doesn't deserve the bad rep it sometimes gets in the press.

To begin with, when a borrower takes out an interest-only mortgage, it doesn't mean the borrower pays only an interest payment for the life of the loan. These types of loans typically contain a provision to make interest payments only during the early years of the loan.

These loans give a borrower the option -- not the requirement -- to make a payment consisting of interest without paying principal, resulting in a lower payment. The loan balance does not increase. It works well for buyers whose income fluctuates, and it certainly comes in handy during financial emergencies.

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• Should You Lock Your Loan Rate?

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_{At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.}