What is an interest only loan and what are the benefits and drawbacks?
I was recently pre-qualified for a loan and the loan officer didn’t mention any other loan programs except for an FHA? I had to ask about the first time buyers program. I’m just wondering what are some other loan programs and where could I find out about them.
Hi I am a mortgage consultant, an interest only loan is always charged at a higher interest rate than a principal and interest loan, and if you are paying interest only then you are not paying anything off the purchase price of the property, there are lots of opportunities at the moment for better mortgage deals, if you are located in Australia then contact me and I will give you free advice. shemay1@yahoo.com
an interest only loan means you only pay the interest accruing.
the advantage is having lower payments, because you are not actually paying off what you owe.
you could do that for a year or two to clear your other commitments, or to wait for a child to enter school so both parents can work.
In Australia, you must finalise a home loan within 30 years of taking it…so paying interest only is actually increasing the rate that you must later pay.
If you are certain your home will increase in value, you could presumably pay interest only for an extended period then sell at a profit, clear your debt, and walk away with the remaining cash.
However, banks are reluctant to grant such conditions due to the uncertainty of selling at a profit.
If your a first time home buyer, you need to do a lot of research on all the loan programs. Perhaps the reason why the LO was recommending the FHA is because of credit concerns. Don’t know since I do not know your credit profile. You might want to go to banking web sites and/or the NFCC (National Foundation of Credit Counseling) website. There are too many loan programs to list and explain on this forum. I would suggest that you talk to your friends and family to see what they did on their first home purchase. Dump the person that was not open enough to explain other programs available for you. Hope this helps you, contact me directly if you have any questions.