Interest Only Mortgages For Bad Credit
Interest only mortgage means an option to pay off the interest and principal or as much interest as one desires during the loan period. This gives the freedom of deciding one’s payments and flow of cash each month. This reduces mortgage payments monthly and one has flexibility with payments. This is a better option for those who have poor credit for they can make payments for the interest less frequently, giving them time to stabilize their finances.
One of the causes why people opt for this scheme is that with conventional loans, one ends up paying towards the interest and the principal. With this option, one is allowed to make payment only for the interest for the initial years. The remaining principal and interest is paid off in the remaining period of time. This enables more cash in hand that can be carefully invested to yield benefits.
This scheme is not for everyone though. Some people are unable to understand the loans and take incorrect decisions. Some think that they cannot make equity on the homes if they do not pay towards principal amount. Facts prove that real estate appreciates by 5 percent annually and the equity is still built on the house despite no payments made towards the principal amount.
Some advantages are:
- Loans of this nature are priced more reasonably because payment is only made to the interest in the early years.
- With this kind of lone, one can afford costlier houses.
- One saves money and can invest it carefully for the future.
Some disadvantages are:
- Equity on the house is possible only if there is appreciation on value of the house
- Eventually one ends up paying off the whole loan with interest.
- If value of your property decreases during the loan period, one goes into losses and ends up paying much more that what the house was valued at.
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