Interest-Only or Interest-First mortgages have been around for quite some time now, but have recently been exploding in popularity. Originally offered primarily in the non-prime market, interest only mortgages are now available as conforming loans and can come as a feature on a wealth of loan programs, including adjustable rate mortgages, 40 and 50 year term loans, stated income loans, and to borrowers with credit scores as low as 540.
The first thing you should know about an interest-only mortgage loan before you commit is that YOUR PAYMENT WILL CHANGE. (read, YOUR PAYMENT WILL INCREASE). With an interest-only loan, your first payments are towards the interest, not the principal. After a set amount of time (traditionally, anywhere from two to fifteen years), the lender will require you to start paying back the principal along with your interest payments. As long as you are prepared for this payment adjustment, interest-only loans can be an extremely useful tool in financing, especially purchases. With a lower monthly payment, your purchase power increases when shopping for your dream home, and you can always re-finance down the road to a regular amortizing...
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