State Capital Group Corp.

Interest Only Mortgages

Interest Only

Interest-only loans allow you to pay just the interest on your mortgage for a certain period of time, typically at the beginning of the loan. In this way, you can make larger payments and pay off your mortgage faster. When the interest-only period ends, the monthly payment will be higher than it would have been if it had been fully amortizing from the start. The longer the interest-only period is, the larger your new payment will be. You won’t build equity during the interest-only term, but by extending the term, you could buy a more expensive home.

Your qualification for this loan product will be based on the interest-only payment and you’ll likely refinance before the interest-only term expires. That’s a way to effectively lease your dream home and invest in other investments while still reaping the tax benefits of ownership.

For example, taking out a $250k loan for 6% for 30 years would mean your monthly payment is $1,499. Alternatively, if you use a 6% loan with a 5-year interest only plan initially, your monthly payments in the first five years would be $1,250. This would save you $249 per month or $2,987 a year. However, when you reach year six of the interest only plan, your monthly payments will jump to $1,611. Hopefully your income has increased to support this higher payment or you have refinanced your loan by that time.

A mortgage with an interest-only payment option might save you money in the short-run, but it will actually cost more over the full 30-year term of the loan. Most borrowers repay their mortgage before it matures, which means that they’ll end up paying more in interest than those who only pay their interest over a 20 or 25 year period.

Interest-only mortgages are a good solution for borrowers who are worried about coming up with a large amount of cash at one time. However, if the mortgage is one that allows you to pay more than the interest, it’s important to utilize your bonuses or extra income during hard times so that you can pay down the principal later on and avoid getting into debt.

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Office Location

300 A N CENTRAL AVE, VALLEY STREAM NY 11580

Email

info@statecapitalgroupcorp.com

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516-881-7784