Mortgage Rate Options
Interest-Only
Interest-only mortgages are a type of home loan where, for a specified period at the beginning of the loan term, the borrower is required to pay only the interest on the loan, not the principal. This period typically lasts for 5 to 10 years, after which the loan converts to a standard amortizing loan, and the borrower must start making payments on both the principal and interest. This shift results in higher monthly payments for the remainder of the loan term.
rate adjusts.
Key Features of Interest-Only Mortgages
Lower Initial Payments
Since the borrower is only required to pay the interest on the loan during the initial phase, the monthly payments are lower than they would be with a traditional mortgage that includes both principal and interest.
Conversion to Amortizing Loan
After the interest-only period ends, the loan converts to a typical amortizing loan, and the borrower's monthly payments increase since they now include both principal and interest based on the remaining loan term.
Loan Balance Remains Unchanged
During the interest-only period, the principal balance of the loan does not decrease since the borrower is not making payments towards the principal.
If you have questions on whether an Interest-Only Mortgage is right for you, let's chat!
For information purposes only. This is not a commitment to lend or extend credit.
Information and/or dates are subject to change without notice. All loans subject to credit approval.
CA Department of Real Estate #01505999
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