An interest only mortgage is advantageous for you if you expect to make a lot more money in the next few years, if you make commissions or bonuses infrequently, or if you plan on making a wise
With this type of loan, a five or ten year interest-only period is typical. When this period is over, the principal balance is amortized for the remaining term. Practically, the early repayments during the interest-only period are significantly lower than the later repayments. If you expect to increase your income by a lot, it will allow you to borrow more than you would've been able to afford, or for investments purposes, you can generate cashflow when you might not be able to. During the interest-only years of the mortgage, you are basically renting the house since none of the principal loan decreases. Paying property tax and purchasing mandatory property insurance are two disadvantages in many states. On the other hand, the owner is still gathering appreciation, even if they aren't paying down equity against their loan, and there are many other tax advantages to home ownership not available to renters. In cases of aggressive appreciation, a 100% mortgage-to-value interest-only loan may also be able to be converted to a conventional mortgage with a more favorable mortgage-to-value loan, resulting in an overall lower payment.
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