NJ Interest Only Loans
With a typical amortizing mortgage loan, each monthly payment will consist of;
- Interest due on the outstanding monthly loan balance
- Principal payment to reduce the loan amount
However, with an “interest-only” mortgage your monthly payment is for the interest due that month. A principal payment is not included or required.
This “interest only” method of payment will take place for a fixed term. After the end of that term – usually five, seven or ten years – you are required to include principal payments each month sufficient to pay off the loan balance in full by the end of the remaining term.
As an example, a 7/1 – 30 Year Interest Only Loan is a 30 year loan with the interest rate fixed for the first 7 years. During that 7 year period (for the next 84 payments) you are only required to send in the monthly interest due. Principal payments are not required. After 7 years, you would be required to make principal and interest payments sufficient to amortize (pay off) the outstanding loan balance within the remaining 23 years.
Benefits of an Interest Only Loan:
- Lower initial monthly payments
- Ability to defer principal payments to a later date
- Increased affordability and flexibility
It’s important to note that an Interest Only mortgage loan is not for everyone. And that this type of loan should not be used simply to qualify for a larger home loan.
Instead, an interest only loan should be viewed as a financial tool that can be used by a borrower with the means pay down principal at a later date. A typical Interest Only loan client is someone that receives a year-end bonus, is self-employed, or plans to pay down the principal through other means..
You might consider an Interest Only loan if;
- Your main income comes as a year-end bonus or quarterly commission
- You plan to sell your home or change the mortgage terms in the near future
- Your goal is to have the lowest payment possible in the short term
Many of our Jumbo loan clients ($1,000,000 and above) select Interest Only loan options.
Find out if an Interest Loan is right for you
Call or email a local American United Lending Professional today.
