Posted by jojo_MN on 2/15/05 11:36am
Msg #20660

Interest-only mortage loans

I was just approached by a lender (at my request) to re-do my mortgage with an interest-only loan. I've done over 500 closings and have never run across one. Do any of you have experience in that area? I was told they have been around for a couple years on the coastal states (I'm in Minnesota). Would appreciate any info. TIA

Reply by Art_MD on 2/15/05 11:47am
Msg #20661

I probably closed 25 interest only refis.

1. there are several veriations.

One example - your loan is for 30 years. For first 10 years you pay interest only. Next 20 the amount you pay covers principle and interest to zero the loan in the 20 year period.

To get an idea of payments get an amortization calculation from the web.

you can calculate interest only payments : 100,000 @ 6% = $6,000/yr or 500 month for 10 years.
using calculator, then calculate a $100,000 mortgage for 20 years. This would be payment last 20 years.

Art

Reply by Jennifer Irby on 2/15/05 1:35pm
Msg #20665

Hello Jojo,

Interest only mortgage loans are good for many different reasons, depending on your particular circumstances.

Investors-Good to keep the payment low for intended rentors depending on the market. Plus the investor does not necassarily care if principle is paid down, because the property is building equity. Keeping money in their pocket to invest in other properties, etc.

Home Buyers-Good if you think you might possibly move in the next 2-5 years. Does not pay down principal, but keeps your monthly payment low and you can figure out what your payment would be on a 30 year and add the additional amount to principal each month as you are able to. Negative side-If you do not move during the initial interest only period, the payment will increase to include principal.

**Most people refinance their home every 3-5 years.

Best of luck with your decision. Jennifer