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you are here: DentalPlans.com > Dental Health Articles > Real Estate > Get Low Payments with Interest Only and Adjustable Rate Mortgages
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Updated: 9/21/2007 12:05:10 PM |
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 (ARA) - There are so many types of mortgages programs available to home buyers that it can get difficult to keep them all separate. One of the latest types of programs that many people are taking advantage of is the Interest Only Mortgage option. With an interest only mortgage you are only required to pay for the interest that accrues on your loan.
The lower payment you will see when only paying the interest on your loan is great, but there are a few tradeoffs. First, you are only making interest payments so your monthly payments will not build home equity. If you take on an interest only mortgage loan, ensure that you make extra payments every month or two to pay down the principal and build home equity.
Many brokers will offer discounted rates for an interest only mortgage loan. Interest only mortgage loans remain interest only for a set number of years. When that time runs out, you will start making interest and principal payments.
Prepayment Penalties on Adjustable Rate Mortgages
An adjustable rate mortgage (ARM) is a great way to get a very low rate, fixed for the first few years of your life as a homeowner. These are especially great when you can refinance before your rate begins to adjust heavily. But, be sure to ask about the "prepayment" penalty that is associated with it.
A prepayment penalty can prevent homeowners from refinancing their ARM before it is too late. These prepayment penalties typically equal between 1 and 5 percent of your principle balance if you sell or refinance too early. Many people assume these clauses due to the fact that you can often get a reduced rate for such a penalty clause. In an ARM, because of the potential for high adjustments, it is important to avoid a restrictive prepayment penalty.
Adjustable Mortgages -- Risk vs. Reward
Many people today are keeping their mortgage payments lower by getting an ARM. Adjustable mortgages are often fixed at a very low interest rate for anywhere from 6 months to 5 years. These very low rates can keep your payments low for a while, but when they begin to adjust, is where the risk comes in.
Nobody knows how mortgages will be affected by future interest rate changes. If you are in an ARM, keep your eyes peeled for changes to interest rates. If you see a pattern of rate changes that many be bad for your adjustable mortgage, refinance the loan before it adjusts and move it into a fixed rate or a longer adjustable period.
With the services at FinanceBox.com you can get the best mortgage loan rates that you qualify for. They focus on matching you with lenders who compete for your business and make it easy for you to get the best deal available.
If you're considering a home refinance and want to know the best rates you can quality for, long on to www.financebox.com. Fill out the simple form, and you'll be matched with several companies in your area ready to do business with you.
Copyright © 2007, ARAnet, inc.
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