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New Home Loan Options: Interest-Only Plus Fixed-Rate Mortgages
by Gil Mackey
CMR Columnist
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In today's market, many lenders are offering a variety of mortgage products, including fixed-rate new home loans with an interest only option.
The Benefit of a Fixed-Rate Mortgage
Homeowners looking for stability and predictability often turn to the fixed-rate mortgage. This home loan makes budgeting your mortgage payments easier, with a locked in rate that won't change for the lifetime of the loan. Many people, however, are unable to afford homes today because their incomes aren't keeping up with the cost of homeownership. This is where a combination interest only and fixed-rate mortgage can help out.
A New Home Loan Option
This mortgage solution is only a few years old and offers homeowners the option of making interest only payments on their mortgage for an introductory period. While the specifics of this new home loan can vary from lender to lender, the general idea is to offer the homeowner financing options. For example, one mortgage lender gives you the freedom of choosing to make an interest only mortgage payment for the first ten years. Then, when the ten-year period is up, the full monthly interest and principal is due.
Is it the Right Mortgage?
It's important to make sure the mortgage you choose fits your goals and financial future. This new home loan option might be perfect for you--it gives you a great deal of flexibility to invest the savings elsewhere or simply provides a temporary relief if times are tight. For homeowners with fluctuating income, particularly small business owners, this can be an ideal solution. But with any interest only mortgage, it's important to consider the consequences of negative amortization. If you don't pay down your principal, the amount you owe on your new home can grow quickly and at some point you need to get caught up.
About the Author
Gil Mackey has been a writer and artist for the past twenty years. In addition to freelance writing, he writes for his local paper and lives with his two children in Nevada.
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