How to Refinance: Find Flexibility with an Interest Only LoanBy Debbie Wilson
Today's creative interest-only mortgages can be very appealing, especially if you plan to move soon or just need some extra cash. Find out if refinancing to an interest only mortgage is right for you, and whether the monthly savings could allow you to complete those home repairs or pay school expenses.
Interest Only Mortgage OptionsTypical interest only mortgages offer you the advantage of paying just the interest portion of your mortgage. In most cases, the term of the interest only mortgage is for a period of three, five, seven, or ten years. But how do you know if such a refinance plan is right for you? If you plan on only being in your home for a similar period of time, an interest only mortgage might be the way to refinance since it can free up cash that you might otherwise need for college tuition, home improvements, medical bills, or other necessities.
Additionally, with most interest only mortgages, you have the option of paying as little or as much principal as you desire on any given month. Consequently, this option might appeal to you if you like the idea of flexible monthly payments that can be adjusted to your individual situation on a month-to-month basis.
Interest Only Mortgage and Home EquityYou may have been told by others that by not paying down your loan's principle, you're also not building any homeowner's equity. But for most people today, this is simply not the case. In an appreciating real estate market, you could experience an increase in your equity through home value appreciation alone, equity that could average anywhere from 4-6 percent per year.
So don't let all the hype about interest only loans scare you away. With flexible options, increased cash flow, and more control over your refinanced mortgage, it might just be the loan you've been searching for.
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About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.
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