Home Equity Line Of Credit Rates

Interest Only Home Loans

Interest only home loans have a major drawback, in that you are not building up equity in the home. The equity being your ownership in the home. The principal remains the same in the beginning, you are only paying interest. Of course, in interest only home loans your monthly payments will be considerably lower, no principal is being paid. With no equity in the home you will not be able to get a home equity loan, though you knew this, when you investigated interest only home loans.

Basically, it is similar to renting, with the added advantage of being able to deduct substantial interest payments on your taxes. If you are planning to stay in the home temporarily, this could be for only a couple of years, interest only home loans or mortgages could be beneficial. It will give you time to save money, since your monthly payments are much lower than demanded by a traditional mortgage. Money can be saved for a college education, a new car, pay down credit cards or even dabbling in the stock markets or other forms of investing.

Interest only home loans and mortgages should not be considered, if this home will be your residence for the foreseeable future. You can still build equity in your home with interest only home loans, if the property values are going up in your area, because when you sell the home you will realize a profit. On the other hand, should property values fall, you will lose equity, if you had gained any. If not you can be ‘under water’, paying off a home that is worth less than when you purchased it.

Interest only home loans will not stop you from paying down your principal if you have the funds. Also, after a set amount of time, your mortgage will convert automatically to a mortgage that will begin having you pay the principal too. Generally speaking, interest only home loans are for those who know for sure they will be relocating in the not too distant future.