Interest Only Mortgages

Interest-only Mortgages

With most home loans, your monthly mortgage payment will include principal and interest. An interest-only loan is different because you will pay only the interest on your mortgage for a set amount of time, usually five to 10 years. During this time, the principal will remain unchanged.

This type of loan can allow you to buy a home that is more expensive than you could otherwise afford with a standard loan.

Interest Only Mortgage

The following are people who usually consider an interest-only loan:

  • Buyers who own investment property
  • Buyers who are comfortable with the idea that their payment will go up when the interest-only term ends
  • Buyers who are self-employed, make a large down payment and maintain a high account balance
  • Buyers who prefer investing their money elsewhere, instead of locking it into a house payment
  • Buyers who prefer a low payment to building equity
  • Buyers who are sure their income will go up in the next few years, but want a more expensive home now
Interest Only Mortgages

Interest-only Mortgage Drawbacks

While this loan option can make sense for some borrowers, it is not for everyone. Interest-only loans do not amortize, so you will quickly find yourself underwater if home prices drop. You can guard against this by putting down a large down payment for instant equity.

The monthly mortgage payments can also rise a great deal after the interest-only period ends, so you will need to be sure you can afford larger payments that include principal. Remember that you may find it impossible to refinance your loan later if home prices do not rise and you lack equity.

Interest Only Drawbacks

New Mortgage Rules

Interest-only home loans became very popular during the height of the housing bubble, and they are still popular today among well-qualified buyers. Before you apply for an interest-only loan, it is important to understand how new mortgage rules that went into effect in January 2014 impact this loan option. Interest-only mortgages are excluded from Qualified Mortgage status, which is designed to protect lenders against liability if borrowers default. This means you will only get approved for the loan if you are very well qualified with substantial assets and a significant down payment.

Types of Mortgages

Contact Us Today

Mortgage Investors Group, based in Tennessee, offers residential financing in a number of states in the southeast, See MIG Service Areas. Terms and conditions to apply to home financing. We want to share with you the loan terms vary based on several characteristics and your financial profile. These include but are not limited to loan program, loan purpose, occupancy, credit history, credit score, assets, and other criteria per loan type. The repayment terms and interest rate may vary from time to time. The terms represented here are based on certain assumptions outlined below and/or noted on the loan outline page. Additional details concerning privacy, program disclosures, licensing specifics may be found at migonline.com Legal Information.

MIG Loan Officers will help gather the information needed for an individual assessment to provide home financing which matches the loan characteristics with your home financing needs based on your financial profile, when you are ready to begin a full loan application. For estimates and general information before that step, the basis for which the mortgage financing information are as follows:
  • Rates are subject to change at any time.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Payments will vary based on program selection, current rates, property location, etc.
  • Not all programs are available in all states.
  • Some loan programs may not be available to first time home buyers.
  • Terms and conditions apply, which may include restrictions or limits per loan program.
  • Information is generally based on primary residence occupancy with no cash out when refinancing.
  • Unless otherwise stated, terms shown are estimates based in part on credit score of 700 or higher; owner occupancy, escrow account is established for taxes and insurance(s); debt-to-income ratio no higher than 43.0%; PMI applies to conventional loan programs over 80.0% LTV; VA,FHA & RD require insuring fees included in loan and/or payment; fixed rate, 30 year term.

An MIG Loan Officer is available to help with your financial details to determine which characteristics apply to your situation for a personalized look into which loan program best fits your home financing needs. Please use the Find a Loan Officer link or reach out to Mortgage Investors Group at 800-489-8910. Equal Housing Lender 1.2020