When You Should Choose an Interest-only Loan
Many people know the Interest-Only loan because of it's low payment reputation. But an IO-loan is not right for everyone. Let's look at a few things to consider before you ask your lender for an IO-loan.
An Interest-only loan is a good choice when you expect your income to rise in the near future. If you've got a study to finish, or a promotion to come, you can choose the IO-loan. It gives you low monthly payments now and when the mortgage payments get higher you can afford it because you've gone up in income.
If your income has ups and downs, an IO loan an also be a good option for you. It gives you the possibility to pay the minimum in months were you're income is on the low side and pay more when you're having a good month. One of the advantages of an Interest-only loan is the fact that you can pay off principle without a penalty. Be sure to pay off principle in good times, or you may be hammered with higher payments when your Interest-only loan ends.
If you are a first-time home buyer, an IO-loan allows you to get more home with your income. The smart way if using this advantage is buying a starter home, waiting until it has risen in value enough to make a profit and then selling it. The mortgage gets paid off and the profit can be used to buy the next, bigger house. The next mortgage can be a 'regular' mortgage.
What you need first and foremost for an IO-loan is financial discipline. You need to be disciplined enough to pay off some of the principle on your home whenever you can. If you don't, you will be hit hard by a big increase in payments when your Interest-only loan ends.
An Interest-only loan is a good choice when you expect your income to rise in the near future. If you've got a study to finish, or a promotion to come, you can choose the IO-loan. It gives you low monthly payments now and when the mortgage payments get higher you can afford it because you've gone up in income.
If your income has ups and downs, an IO loan an also be a good option for you. It gives you the possibility to pay the minimum in months were you're income is on the low side and pay more when you're having a good month. One of the advantages of an Interest-only loan is the fact that you can pay off principle without a penalty. Be sure to pay off principle in good times, or you may be hammered with higher payments when your Interest-only loan ends.
If you are a first-time home buyer, an IO-loan allows you to get more home with your income. The smart way if using this advantage is buying a starter home, waiting until it has risen in value enough to make a profit and then selling it. The mortgage gets paid off and the profit can be used to buy the next, bigger house. The next mortgage can be a 'regular' mortgage.
What you need first and foremost for an IO-loan is financial discipline. You need to be disciplined enough to pay off some of the principle on your home whenever you can. If you don't, you will be hit hard by a big increase in payments when your Interest-only loan ends.
About the Author:
WIC is an institution that writes about financial matters. They also write articles about minilening and geld lenen in Dutch.
posted by Debt Consolidation Loan at
4:49 PM
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