Interest-Only Mortgage Loan Refinance - 5 FAQs [mortgagecalculator-tips.blogspot.com]
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mortgagecalculator-tips.blogspot.com Personal Finance Terms 101: Interest-Only Mortgage
Mortgage loans are the only way that the vast majority of us can ever afford a home of our own. Taking out a mortgage is the only thing that stands between you and a home - or a refinance of your existing mortgage.
Of course, getting the right mortgage for you is no trivial matter. Mortgage payments can be quite costly and can be a real barrier for most of us who are considering taking out a new mortgage loan. One of the easiest ways to reduce the costs associated with a mortgage refinance is to take out an interest-only refinance loan.
If you are looking for an interest-only mortgage loan refinance, here are 5 FAQs on how to refinance your mortgage in the cheapest way possible:
1. What is an interest-only mortgage?
A: An interest-only mortgage loan is essentially a loan whereby you (the borrower) only pay the interest you owe on the loan.
This means that, as you make payments each month, you will never actually be paying down the loan principal at all. The result is that you would make lower payments than with a standard mortgage loan, but the downside is that you never see a reduction in your loan principal.2. Can I pay more than the interest portion if I want to?
A: Yes, these loans are structured in such a way that you are not penalized for paying more than just the interest portion. When/if you do, you will see that the interest payment due in the following month will be slightly less since your principal is now a bit lower.
3. When is this type of loan appropriate?
A: Homeowners choose to refinance with an interest-only loan for any number of reasons, including having a fluctuating monthly income or having a desire to invest their money in investments that are likely to earn them a high return on investment (ROI).
4. What kind of interest rate can I expect?
A: In almost all cases, you will pay a higher interest rate for an interest-only loan, since the lender will view this type of borrower as being a bit more risky for them than is one who chooses a standard mortgage.
5. What is the best way to shop for the lowest-possible rate?
A: To get the lowest-possible rate, it is a good idea to shop around with multiple lenders. Start by finding out your latest credit score. Then, apply to at least 5 lenders and compare offers.
Consider these answers to 5 frequently asked questions about an interest-only mortgage loan refinance.Â
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