Paying interest tends to have a negative connotation. Whether you’re carrying a balance on your credit card or borrowing on a line of credit or personal loan, the idea of paying someone more than the value of your purchase can feel… well… wrong. And for most homeowners, the emphatic goal is to be mortgage-free as soon as possible to stop paying that interest.
But for borrowers who have a different approach to finances, an interest-only mortgage may be a more attractive option than being debt-free. And with MBANC, a mortgage where payments are extremely low during an interest-only period of 10 years may pique your interest.
A mortgage with a 10-year interest-only term to start it off could be perfect for you. An initial 10-year period of interest payments only converts to a 30-year fixed-rate mortgage combining principal and interest. Since there’s no balloon payment necessary, it’s almost like the mortgage approval just carries over for ten years.
How can it work with your lifestyle? With interest-only mortgages available on all types of mortgage products at MBANC including purchase and refi, Here are a handful of benefits.
Lower monthly payment
When you have to pay closing costs, lawyer fees, home inspection costs, and any updates or renovations at the start, the usual monthly payment can be difficult. If you can pay less than half of the usual payment for the first ten years, what could you do with that money?
Capitalize on a better interest rate or term
Interest rates fluctuate over the years. Look back just over a decade and you’ll see a time when homeownership was difficult due to high interest and tough qualifying terms. With a term that totals 40 years – a 10-year initial interest only period and a subsequent “normal” mortgage loan term of 30 years – you’re able to secure today’s rate over the life of the loan.
Who knows what financial or economic issues are coming in the next few years? If you decide to take one of the 5/1, 7/1, or 10/1 adjustable rate mortgages (ARMs) that have low advertised rates, you could be in for a rude awakening when the rate climbs down the road. With a locked-in rate spanning 40 years, there’s no issue with stability.
Access to funds for remodel
If you’re looking to refinance your home to remodel along with low payments, you can get the best of both worlds. Interest-only loans can be relatively stress-free compared to short-term personal loans or lines of credit. Pull out enough equity to renovate the kitchen or finish the lower level, and you still don’t have to worry that the payments will be too high to manage.
More cost-effective than renting with benefit of equity
Renting a home is popular because you can often save money compared to making payments on mortgage principal, interest, and insurance, among other things. But when you begin your homeownership journey with a 10-year period free from principal payments, you enjoy low payments on a home that you’ll eventually own outright. And while your first 10 years of payments don’t lower the principal amount, you still gain the benefit of growing equity due to a real estate market that only ever goes up in value.
At MBANC, all loan programs are eligible for 10-year interest-only options. Think it might be right for you? Why not ask a mortgage analyst today?