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Interest Only Mortgage - Good or Bad Idea?

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If you play your cards right, you can make a killing with Interest Only Mortgage. Know the facts before you invest on this type of mortgage. Actually, Interest Only Mortgage is a little bit of a misnomer. This mortgage is not another type of mortgage. It is more an option on your mortgage. That means any borrower can get this option on their mortgage.

Forecasting the Interest Rates

It is hard to predict how the interest rate decreases or increases in the future. Interest Rates depend on many factors. Look for trends. If you think the interest rate will decrease, you may want to hold off Interest Only Mortgage to purchase a home.

Value of Property

Interest Only Mortgage can be profitable when you sold the property at a higher price. Property Development, Special Events, and Excellent Location increases value of property over time. Watch out for property development on the area such as shopping mall, more buildings, and theme parks. Look for special events such as winter Olympics, summer Olympics, or so. Also, the downtown area is bound to increase in value. It is not advisable to invest on property when the value is going down. In case, the value of property goes down. Be patient. Wait for the value to go up.

Zero Equity

Bear in mind that the principal stays the same in Interest Only Mortgage. Your income depends on how much you sell the property, and what you did with the savings. Instead, you can invest the savings on improvement of your property and mutual funds of your choice.

Nothing last forever

Your mortgage lender will ask you to repay the principal over time. Be aware how long you can stay on interest only mortgage. So, you can make arrangements when you sell the property.

Dennis Estrada is a webmaster of mortgage calculators which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

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