Do
You Know the Pros and Cons of a Interest
Only Mortgage?
by Marie-Claire Ng
Has any lender ever told you the Interest Only Mortgage was
like a double-edged sword? It can help you achieve your dream
of owning a home more easily, but it
also can create a financial hardship for those
who don’t fully understand what’s involved.
Interest
Only Mortgage has become more popular to
new homebuyers for the following reasons:
- Since the monthly payment is low, the
savings can be used for personal spending,
paying off higher interest debts, buying
furniture for the new house, or even
investing.
- The interest paid to the Interest Only
Mortgage is still eligible for
tax write-off at the end of the year.
- Some Interest Only Mortgages
allow you to make a principal
payment during
the
interest only period. This helps
reduce your balance the following
month which
lowers your payment further.
However, Interest
Only Mortgage is not for everyone.
- Beware a potential prepayment penalty
for the first 1-3 years imposed by some
lenders.
- You have to play the “catch up game”
once you begin to pay the principal.
The amount is much more since you
didn’t pay
during the interest only payment
years.
- Think twice before committing
to an Interest Only Mortgage
if it’s the only
way for
you to afford a house.
Marie-Claire Ng may be contacted at dtt@mcvt-groups.com
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