An interest-only loan gives you the option to pay only the
interest or the interest plus principal whenever you like for a specified
amount of time during the loan term.
For many, the most appealing feature of an interest-only
loan is that in any given month during the interest-only period, you control
your payment amount and your cash flow, and your monthly mortgage payment will
be lower than it would be with an interest plus principal payment.
Depending on your specific situation, your interest rate may
or may not be lower than a conventional mortgage, but you will have the option
of flexible payments.
If every month during the interest-only period, the borrower
exercises the interest-only option, the payment will not include any repayment
of principal. The result is that the loan balance will remain unchanged.
Are you ever heard of the interest only home equity loan? For
homeowners, interest only home equity loans are one more type of home equity
loans who require cash from their home equity but are worried of that they
might not be able to sustain with the payments.
Interest only home equity loans are different from the usual
home equity loan since the loan makes an interest only payment, which does not
include any of the principal during the preliminary phase.
The lender of the interest only home equity loan is
responsible for the period of the interest only home equity loans. Usually,
from one to five years, the interest only phase of the interest only home
equity loans lasts.
The interest only home equity loan is converted into a fully
amortized and traditional home equity loan when the phase of the interest only
ends. Compared to the usual home equity loan, the borrower will have to pay off
more in less time.
The interest only phase of these home equity loans are not
forever. Always think twice about the terms and agreements of the interest only
home equity loan that you are getting. You must try to ask for advice from friends
and trusted associates who have tried the interest only home equity loans.
From the existing credit line, each type of home equity line
of credit offers the homeowner a way to acquire added benefits.
For example, knowing
that a line of credit had been made available, the homeowner could choose to
increase the insurance deductibles. The higher deductibles would guarantee a
decrease in the premium payments on the insurance policy.
At a store that chosen by the homeowner, a home equity line
of credit could also be used to buy discount credit cards.
In addition, the
possession of a home equity line of credit gives the homeowner the ability to
make purchases with a Rewards credit card and to then pay the card payment with
the check obtained through the credit line.
Banks tend to offer the homeowner more than one-way to
obtain an interest only home equity line of credit. One bank for example has
advertised the existence of one plan whereby the homeowner gives payments that
cover the Prime plus 5% for five years.
Then in the next ten years, the
homeowner pays a floating interest rate, a rate that is determined by the Prime
rate.
The homeowner should also think about some of the other
approaches to the offering of a home equity line of credit. For example, at the
start of the period of the credit line, some banks will offer a draw period.
During this draw period, the homeowner can withdraw funds for making advances,
for repaying advances or for advancing the line of credit. The draw period is
followed by repayment period.
Related Articles:
|
