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Getting an interest only home mortgage is something that a lot of borrowers are doing these days. Interest only mortgages present buyers with another option besides the normal 30-year fixed rate loan. When you are shopping for a mortgage, you may be tempted to go with an interest only mortgage for your home loan. You may be wondering whether or not this could benefit you as a home buyer. Here are a few factors to consider.
Lower Payment
The major way that this loan can benefit you is by providing a low monthly payment. Since you are only paying the interest on the loan, it is going to be cheaper than any other type of mortgage out there.
No Equity
One of the big drawbacks to this type of mortgage is that you do not build equity. You are never paying off any of the balance as you go.
Balloon Payment
At the end of an interest only loan, you will have to make a balloon payment that covers the entire mortgage balance. This can catch a lot of people off guard, as it is a very large amount of money. If you do not have the sum of money at the end of the loan, you could risk foreclosure.
