Interest-Only loans have become popular in recent times, partially thanks to the housing boom. Despite it’s popularity, you may not be right for an IO loan. We’ll take a look at a few determining factors to decide if an IO-loan is right for you.
An IO-loan is a great option when you’re expecting an increase in income. You can have low monthly payments now and be ready for the higher monthly payments when your income has increased. If this fits your picture, an IO-loan is one of the best options for you.
If your income has ups and downs, an IO loan an also be a good option for you. It gives you the possibility to pay the minimum in months were you’re income is on the low side and pay more when you’re having a good month. One of the advantages of an Interest-only loan is the fact that you can pay off principle without a penalty. Be sure to pay off principle in good times, or you may be hammered with higher payments when your Interest-only loan ends.
Many first-time home buyers choose an IO-loan because they can get more home with this mortgage option. Many first-time homebuyers buy a small house with an IO-loan, wait until it appreciates and then sell it for a profit. Then, they can buy a bigger house with a ‘regular’ mortgage because.
What you need first and foremost for an IO-loan is financial discipline. You need to be disciplined enough to pay off some of the principle on your home whenever you can. If you don’t, you will be hit hard by a big increase in payments when your Interest-only loan ends.
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