Learn About An Interest Only Mortgage
As real estate prices have risen, so too has the number of people seeking an interest only mortgage. These types of loans are attractive because the borrower is only responsible for paying off the interest on the loan, making monthly repayments lower in comparison to traditional home mortgage loans. Essentially, an interest only mortgage payment is going to always be less than paying off both the interest on the loan, along with a small portion of the principal loan amount.
California Interest Only Mortgage Loans
A California interest only mortgage is often attractive given the relatively high prices of homes, as well as the increasing value of California real estate. An interest only home mortgage loan allows borrowers to move into a home that they normally wouldn't be able to afford. This way, they can move into the home of their dreams now and simply pay off the interest on the loan. They effectively make the amount that the home appreciates over the years. There are fixed rate interest only mortgages that typically carry a 30 year term. If you are thinking of a shorter term lease, consider an ARM interest only mortgage. A California interest only mortgage rate is always going to depend on many financial factors that can be discussed with your mortgage lender. To calculate an interest only residential mortgage, use our interest only mortgage payment calculator.
Interest Only Mortgage Information
What some homeowners do is combine an interest only jumbo mortgage, along with an investment plan in lieu of paying off the principal portion of their mortgage loan. By the time the term of the loan has expired, they can use the proceeds of their investment to pay off the principal. Borrowers who have a hard time making monthly payments on their loan should seek an interest only mortgage. Individuals who are confident in their investment skills should also look into an interest-only mortgage, but they should be aware that failure to make good on an investment may result in a failure to purchase the home.
There are basically three main methods of investing simultaneously with an interest only mortgage program:
Endowment Policies – This is generally the most common method of investment that coincides with this type of mortgage. Typically with an endowment policy, money is invested in stocks, some of which pay out annual bonuses, and you can collect a lump sum when the term has expired. Another feature is that an endowment policy comes with life insurance.
ISAs – Individual savings accounts are a more flexible type of investing money that feature tax benefits. In other words, investors do not have to pay taxes on their income or on the capital gains from the ISA. ISAs typically consist of various combinations of the following: insurance, stocks/shares, and cash.
Pensions – A chunk of your pension fund is put towards repaying the principal of the mortgage when the specified term expires. This may be as long as forty years. Similar to ISAs, pension plans also grant tax relief on contributions to the fund. The main drawback of this method of investment would be the potentially large portion of the pension fund that would need to be used to pay off the capital of the loan.