When it comes to borrowing money, you can buy a home and still have some degree of fiscal flexibility, as long as you choose the right kind of loan. Traditional mortgages require the borrower to pay a portion of the principal and the interest at a fixed, monthly rate, but you can have the financial freedom and enjoy the other benefits of interest only loans, which require the borrower to pay on the interest at a fixed monthly rate for a number of years. You may be attracted to the benefits of interest only loans, but wonder if such a plan is right for you. Keep in mind that, at some point, you are going to have to start paying the principal, and benefits of interest only loans are best for those who feel confident that their income will substantially increase in a few years.
One of the benefits of interest only loans is that your monthly premiums will be comparatively low for a certain period of time. For instance, you could take out an interest only loan and pay the interest at a set rate for five years, and then start paying the principal as well as the interest beginning in the sixth year. From that point on, the benefits of interest only loans make them resemble regular loans, but you may have an option to adjust the amount of interest you will pay. A payday loan may be another loan to consider instead of interest only loans.
Who can best utilize the benefits of interest only loans? These loans are a popular choice among individuals with a high net worth and who do not want to tie up their equity in a mortgage. Freedom from paying the principle allows them to invest their money elsewhere. Medical and Law students who expect to be making a generous income in a few years’ time enjoy the benefits of interest only loans. These loans are also a good choice for short-term homeowners and real estate investors.