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Ethan
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0.10 Dollars($)
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 Posted: Mon Apr 24, 2006 12:33 pm Post subject: information on fixed-rate interest-only mortgage |
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I am hearing about fixed-rate interest only mortgages quite a lot these days. Is it true that it is gaining popularity? Any drawbacks?
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Rhonda
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0.10 Dollars($)
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| Posted: Mon Apr 24, 2006 12:43 pm Post subject: |
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The advantage is that you can lock in a fixed interest rate over the life of the loan with this program. I think that is the main reason behind its popularity.
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 blue
Joined: 21 Oct 2005
Posts: 1138
Location: MARYLAND
137.64 Dollars($)
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| Posted: Mon Apr 24, 2006 1:06 pm Post subject: |
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Hi Ethan,
Fixed-rate interest-only loan is a new product to help the borrowers with flexibility under the present condition of the market.
This loan program carries both the stability of a fixed rate and the flexibility in payment as in interest-only loan.
The drawback is that as you are not paying interest on your mortgage loan, equity is not built up in your home.
Blue
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Samantha
Community Mentor
Joined: 16 Sep 2005
Posts: 1539
Location: MASSACHUSETTS
137.28 Dollars($)
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| Posted: Mon Apr 24, 2006 1:37 pm Post subject: |
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Hi Ethan,
It is true that with the steady increase in rates, fixed rate interest only mortgage is gaining popularity. Through this program consumers can get both the security of a fixed rate and the option for making lower monthly payments.
The rising rates have made this program popular particularly to borrowers who are having financial problems at present and may take a second mortgage later. This program allows the borrower to lock in an interest rate for the life of the loan. The borrowers need not pay principal for the first 10 to 15 years thereby getting their monthly payments reduced.
It can be considered as less risky than other interest only mortgages. The interest only period continues over a decade providing a chance with the borrower to see their incomes rise before the payment is reset. The borrowers also get the idea about the amount higher payment that they have to meet after reset.
Certainly drawbacks are there with no equity built up during the interest only period. In the later years the higher monthly payments can pose problems.
God bless you.
For MortgageFit,
Samantha
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jameshogg
Joined: 20 Dec 2005
Posts: 1514
Location: nevada
210.98 Dollars($)
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| Posted: Mon Apr 24, 2006 1:41 pm Post subject: |
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| I don't think that equity is not built up in the interest only period. As the value of homes appreciates, equity is still built through appreciation even when you are not paying any principal. |
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