Posted on: 07th Sep, 2008 05:56 pm
thereafter it will be 1% less than prime for 20 years only paying interest unless I choose to pay principal after 20 years i will pay interst and principal or should I go with a fixed interest rate
Welcome guest,
An interest-only loan as it is increases your principal balance because you don't pay any part of the principal during the interest-only period unless you wish to. And then if it's an equity loan, I'm sure the rates would be comparatively higher than your first mortgage. After 20 years, if you start paying the principal, I'm afraid it will amount to a lump sum balance to be paid off in the remaining years of the loan.
I suppose you're not comfortable making a large payment now. But after a few years, why don't you tart paying towards the principal? For interest-only loans, you're allowed to make principal payments even during the interest-only period. However, the lender's consent is important and i don't think he'd have any objection to this.
You'll get an idea of interest-only loans from http://www.mortgagefit.com/interest-only.html .
An interest-only loan as it is increases your principal balance because you don't pay any part of the principal during the interest-only period unless you wish to. And then if it's an equity loan, I'm sure the rates would be comparatively higher than your first mortgage. After 20 years, if you start paying the principal, I'm afraid it will amount to a lump sum balance to be paid off in the remaining years of the loan.
I suppose you're not comfortable making a large payment now. But after a few years, why don't you tart paying towards the principal? For interest-only loans, you're allowed to make principal payments even during the interest-only period. However, the lender's consent is important and i don't think he'd have any objection to this.
You'll get an idea of interest-only loans from http://www.mortgagefit.com/interest-only.html .