7 Reasons Interest-Only Home Loans Are a Smart Choice

In a general sense, an interest only home loan is all about money - making it available to you for whatever you need it for. Whether that means to enhance your investments or to put your money where you decide. But here are seven solid reasons for why interest only home loans might a wise choice for you:

1. Not paying the principal is standard practice anyway:If you've ever had a traditional mortgage, you know that for the first few years you are paying practically nothing on the principal. So, with a higher monthly payment for the first 10 to 15 years you are still paying virtually zero against the principal. Well, that's what happens with an interest only home loan, too, except with a much lower monthly payment for the first 5 to 7 years!
2. At first, every mortgage payment is interest only: Mortgages have you paying lots of the interest up front. So, you end up paying off the interest - the lender's profits! - off first before you pay the amount you borrowed! So, everyone with a traditional 30-year mortgage pays only interest anyway, but more of it each month! How is that better than paying interest only, and less of it each month?
3. They are just as consistent as a fixed-rate mortgage: Like a traditional fixed-rate mortgage, an interest only home loan has the same payment each month (unless you should choose to pay extra against the principal). Some get into adjustable rate mortgages to gain the benefit of a lower payment. But unlike an interest only home loan, monthly payments on an adjustable rate mortgage can increase when your interest rate adjusts.
4. 30-year interest only home loans are even better: If you have the option, seek out a 30-year fixed rate, interest only loan. The interest only term is generally a full ten years! Imagine the savings over ten years, and imagine the time it affords you to increase your income and to prepare for the balloon payment by building your owner's equity! And after the first ten years, the loan will convert to a 20 year fixed loan and you are required to start paying down the balance.
5. Your home will still gain great equity: There's a common myth that with a an interest only home loan you will never build any equity. That's nonsense! Plus, with a an interest only home loan you can increase the equity by paying against the principal when your have a financial surplus. And even in with the real estate bubble bursting, most experts agree that home values will rebound, and quickly for those buying at a discount now.
6. Paying down the principal is up to you: The best benefit of the interest only mortgage is that how to manage your money and your real estate investment is up to you! Flexibility and control are left in your hands. And if you are money savvy, that is a really big benefit. So, if you plan to stay in your home, go ahead, pay down that principal. If you see this home as a short-term investment which you aim to sell before the balloon payment is due, just pay the interest and manage the savings as you see fit.
7. If you want to lower your interest payment, you can: Sound crazy? It's not, and it's one of the hidden but dramatic benefits of interest only home loans: When you pay down the principal, you actually lower the effective amount of interest you will owe thereafter. That's right! After paying down the principal, your interest-only payments will decrease!.