Interest-Only Mortgages Aren't Always A Bad Thing!

Interest-only mortgages are utilized by many homeowners and real estate investors as a means to safely increase their wealth. There is a time and place for everything and interest-only mortgages are no exception.

What are interest-only mortgages?

In a mortgage, when principal payment is not required for a certain period of time, it is classified as interest-only. The only payment that is due every month is the interest that has accrued on the mortgage balance. The interest-only period varies but a popular one seems to be 10 years. In the case of a 30 year fixed rate mortgage with a 10 year interest-only period, you will pay interest for the first 10 years of the loan. For the remaining 20 years you will pay principal and interest.

Is it for me?

For a homeowner that is considering an interest-only mortgage I think there are a few questions that need to be addressed. Why are you choosing interest-only as opposed to a fully amortizing mortgage? If your answer is that you can't afford the fully amortizing payment, I think you are making a mistake. If your answer is that you want to invest your savings in a safe investment account, then let's talk.

My approach has always been to educate rather than sell. I want to know that a borrower is using the savings of an interest-only mortgage to improve their financial picture and not to live beyond their means. A popular strategy is to apply the savings of an interest-only loan to some sort of safe investment account. I am not a financial planner, but I would not recommend investing this money in the stock market or other risky investments. True, many investors have performed extremely well in the stock market, but I do not advise that the typical homeowner place their home equity in potentially risky investment vehicles. There are many advantages to this approach including greater liquidity and rate of return. There can also be disadvantages. Interest-only mortgages are not for everyone. Education is the homeowner's most powerful tool in choosing a mortgage strategy. To keep this posting relatively concise, I won't get into great detail on the advantages and disadvantages. To request your FREE detailed report on interest-only mortgages vs conventional 30 year mortgages, visit www.noblelenders.com, and click on the NOBLE TOOLS tab then DOCUMENTS. Select the report titled "Interest Only Mortgage vs Conventional 30 year."