Issues and Concerns of Interest Only Mortgages
Written by JDPGlobal | Monday, 19 September 2005
Interest only mortgages are a burning issue in the business sector right now and they are gaining in popularity in the US and in the UK. It is of utmost importance to understand how they work before taking on one.
They tend to have a very low monthly payment, initially and they are generally sold for 25 or 30 year terms. In the first five to ten years of the mortgage, the borrower is supposed to pay only the interest. The principal part of the loan is waiting for payment. The monthly payments increase to start paying off the principal when the initial period of interest only payments is over.
When it comes to traditional mortgages, more often than not, most of the monthly payment is interest at the beginning of the term but a small part of this payment goes to pay the principal.
Later on in the life of the mortgage most of the monthly payment goes to pay the principal.
