Have you been looking into the prospect of buying a home? If you have, you may have heard about interest only mortgage loans and may be wondering if getting an interest only loan is the right option for you. What exactly are interest only mortgage loans? As the name implies, this type of mortgage is set up so that the borrower (you) pays only on the interest of the loan rather than applying part of the payment to interest and part to principal. Of course, this is not done for the entire life of the loan. When the mortgage is set up, the interest only payment is set up for a set number of years only.
Once that set number of years is up, the borrower “trades in” his interest only mortgage loan for a more traditional one in which he begins to pay down the principal balance as well. Typically, interest only mortgage loans are set up with payments being applied to interest only for the first ten years, and then the loan is changed.
The reason that many folks have been interested in interest only mortgage loans is that they allow the borrower to have a much lower payment for those first ten years. Since you are not paying any principal, the resulting payment...
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