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.

Ready to Read More Financing Articles? Click below:

• How Much Does it Cost to Close?
  
• How is Interest Paid in Arrears?
  
• Should You Lock Your Loan Rate?

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