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Should I consider an Interest-Only loan option?
Interest-Only loans are a good means of either increasing your home purchasing power or maximizing your flexibility to control cash flow. You can save significant amounts of cash for investment, savings, or other expenditures during the first ten years of your loan. This is also a solid strategy to maximize tax deductibility, with more funds available for paying down higher cost, nondeductible consumer debt. With these loans, the minimum payment required covers interest only-you decide how much or how little of the principal to repay each month. These loans should not be confused with negative amortization loans-with Interest-Only the principal balance NEVER increases.
Interest-Only is all about choices...
an ARM that doesn't leave your hands tied!
With an Interest-Only loan, home buyers choose their monthly payment and either qualify for more home, or have more cash in reserve for investment, paying down higher-cost debt, or making home improvements.
Note: This is not a negative amortization product, your principal balance will never increase!
Interest-Only loans offer you:
- Potential for lower monthly payments: for the first 10 years of the loan you can opt to pay interest only-plus any portion of the principal you wish.
- The opportunity to afford your dream home-buy up to 25% more home with Interest-Only monthly payments.
- Tax deductibility benefits
- A wealth of money-management opportunities, with savings for:
- Other investments, including high-yield and tax-deferred savings or maximizing your retirement contributions
- Pay off high-interest, non-tax-deductible debts
- Home improvements, tuition costs, or a dream vacation
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Interest-Only Loan vs. 30-Year Fixed Loan 5-Year Savings |
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Example 1: $250,000 loan |
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Loan Type |
Monthly Payments |
|
30-Year Fixed Loan @ 5.75% |
$1,459 Principal + Interest |
|
5-Year
Interest-Only ARM |
$1,068 |
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Monthly Savings: |
$391 |
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5-Year Savings: |
$23,478 |
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Example 2: $125,000 loan |
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Loan Type |
Monthly Payments |
|
30-Year Fixed Loan @ 5.5% |
$710 Principal + Interest |
|
5-Year
Interest-Only ARM |
$443 |
|
Monthly Savings: |
$267 |
|
5-Year Savings: |
$16,020 |
Here's how it works:
Take advantage of this innovative approach to home financing and realize
the double benefits of more affordable payments plus improved cash flow.
Here's how it works: each month you choose the payment amount. You can
make the minimum interest-only payment in order to maximize your
available cash for other uses or allow you to qualify for more home at a
payment you can afford. Or you are free to pay down any portion of the
principal you wish--it's your decision. Either way, your principal
balance will NEVER increase.
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