An interest only mortgage can be an excellent choice for some borrowers.  They are designed to offer the lowest payment possible as you are not paying anything toward the principal in you normal monthly payment.  Because of the lower payment, the interest only loan may mean that you can buy more home than with a fully amortizing mortgage.  Of course, you may make additional payment toward your principal balance at any time.

    The interest only product was originally designed for individuals whose income is cyclical.  For example, an individual who is a sales executive with a relatively low base salary but commission or bonus payouts quarterely would benefit from an interest only mortgage.  You would have the lowest possible payment during months when no bonus is paid and you would be able to make contributins to the principal balance when the quarterly bonus is paid.  However, we are seeing individuals in many situations choosing this option as a method of lowering their payment, sometimes significantly. This program gives better monthly cash flow.

    Generally, interest only mortgages are available for a 30 year term (a few 40 year terms) with the first 3 or 5 or 7 or 10 years interest only (depending on the lender selected) and the final 20 to 27 years then would be fully amortized.  Some lenders who offer an interest only mortgage require a prepayment penalty for the first 1-3 years and have caps on the amount your rate can change at any time over the life of the loan.  We always try very hard to avoid prepayment penalties on these and other types of loans and can usually work around the requirement.  Another useful feature of some interest only mortgages is that if you choose to make a principle payment during the interest only period, your balance is reduced the following month lowering your payment further.

    Again, an interest only mortgage is not the right choice for everyone, but it can be very effective choice for some individuals.  Please give us a call or fill out the short and simple application, and we would be happy to discuss this alternative with you.

    An example of how powerful this tool can be:

    On a $400,000 mortgage at 6.00% for 30 years, the Principle and Interest payment is $2,398.20.  The Interest Only mortgage payment at 6% is $2,000.00.  The total Monthly savings is $398.00.

    Of all of the interest only programs available, the Cash Flow ARM offers the greatest felxibility.  This program gives 4 options:  a payment lower then interest only, a 15 and 30 year payment and an interest only payment option.  If you have any interest in this program or any of the above programs, call us or fill out the short and simple application.  We would be glad to discuss any of the above programs with you in more detail!