As a qualified borrower, you can take advantage of lower, interest-only monthly payments at the start of your loan. This allows you to have more money in your budget for other expenses, improvements, or investments.
Interest-only mortgages help borrowers qualify for bigger loan amounts, while also freeing up funds during the interest-only period of the loan. During the initial loan term, the borrower is only required to pay monthly interest. After 10 years, the loan transitions into a 20-year variable-rate loan with payments that include both the monthly principal and the interest due.
This loan option may make sense for a buyer who plans to sell within a short period of time, who is confident they will be able to afford the increased future payments, or who will use the money saved each month to cover other expenses. Typically these loans are for high-value, single-family homes or no cash-out refinances.
Interest-only mortgages are offered at an initial fixed rate during the first 5,7, or 10 years. At the end of the initial fixed period, the loan then transitions into a variable-rate loan, but stays interest-only for all of the first 10 years.
An interest-only home loan offers many benefits, flexibility being one of them. If you are someone who doesn’t have a fixed payday schedule, or you anticipate your income will increase, you can begin your mortgage with needing to make scheduled payments only on interest that is owed.
Interest-only loans also allow you to have more control over how you choose to make your payments. During the first 10 years, the borrower can decide if or when they want to make a lump-sum payment, and the amount they pay will be applied towards the outstanding principal balance. Paying off some principal during the first 10 years will reduce the amount of the buyer’s minimum payments.
Georgia Platinum Mortgage loan officers are experts when it comes to jumbo mortgage lending. Contact us today to discuss whether an interest-only loan is right for you.