Interest Only Loan - Is it for You?

An interest only loan is a non-amortized flexible loan in which interest is due at regular intervals until maturity for a period of time, i.e., 3, 5, 7, or 10 years. After the end of the interest only period, the prime rate for interest only loans are then changed where you repay the principal sum in a lump sum amount.

Interest Only Loan Requirements

You may qualify for interest only loans if:

Interest only loans can get you more out of your dollar and probably earn you a lot more dividends if you invest your savings wisely. This type of loan is usually popular among high-finance investors who plan to sell the property for profit after a short term. For long-term property investments, ordinary home buyers are advised to get the regular principal plus interest 30-year loan amortization plans.

Advantages of interest only loans? You have lower monthly payments and it cuts the cost of buying residential properties for short term investments. Disadvantages? Well, interest only loans can be precarious if real estate prices were to fall and you will be obliged to sell at a loss; if you decide to keep the estate, you will have to pay a principal lump sum at the end of the loan maturity period.