Interest Only Mortgage Promotes Cash Flow for Business Owners

By Karen Lawson
LoanPage.com Columnist

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You're a small business owner, and want to put every penny possible into your business. Your cash flow can vary from month to month, and you want to minimize your mortgage payments until your business is on solid footing. An interest only mortgage is designed to assist homeowners who want to invest the amount they would have paid in principal in their business or investment portfolio. An interest only mortgage is not recommended for everyone, but it can be a useful financial tool under certain circumstances.

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Mortgage Product Designed to Provide Cash for Investments

Mortgage lenders provide an unprecedented variety of new home loan products to suit almost any situation. Skyrocketing home prices and increasingly complex financial opportunities have increased demand for innovative mortgage loans that can provide financial flexibility in accommodating unique situations. An interest only mortgage is structured so that homeowners only pay the interest portion of their payments for an initial period of a few years. When the initial period expires, the loan reverts to a traditionally amortized loan, which means that the homeowner will begin paying principal and interest payments. Generally, the amount of principal paid is relatively small during the first years of repaying a mortgage. For this reason, an interest only mortgage is not meant to assist first time homebuyers or others who don't plan to invest the cash flow generated by an interest only mortgage.

Your Financial Goals and an Interest Only Mortgage

An interest only mortgage can be useful for those able to make regular contributions to high yield investment accounts, college savings accounts, or for business owners who wish to invest as much as possible in their businesses. The income you intend to realize should exceed the amount of principal you won't be paying on your mortgage. Consulting a financial advisor can help you determine if an interest only mortgage is an appropriate new home loan option for you.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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