If you’re searching for an affordable way to purchase a property, you may want to look into an interest-only mortgage. Instead of making payments toward the principal balance, investors only have to make interest payments.
When you take out an interest-only mortgage, you will only have to pay interest on the loan for a predetermined amount of time. Generally, this interest-only period lasts for about five to ten years, depending on the terms set by your lender. During this initial term, you’re welcome to make payments towards the principal loan amount, but this isn’t required. If you can afford it, you might want to consider paying the principal on interest-only loan early because it can help reduce your debt.
Interest-only loans are typically structured as adjustable-rate mortgages (ARMs). This means the interest rate on your mortgage will be locked in for a certain timeframe—but, after that introductory period expires, your interest rate will change according to market conditions. While ARMs tend to offer a low introductory rate, be aware that your interest rate can fluctuate later in the life of your mortgage. In addition to ARM loans, I have lenders that also offers interest only fixed rate mortgages either on a 40yr fixed term or a 30yr fixed term.
For example:
30yr fixed rate with the first 10yrs being interest only, after 10yrs the loan reamortize to a 20yr fixed term at the same rate
40yr fixed rate with the first 10yrs being interest only, after 10yrs the loan reamortize to a 30yr fixed term at the same rate
In general, more people are able to qualify for our non-QM loan program compared to qualified mortgages (QMs). That’s because QMs have stricter qualification criteria and more stringent income verification standards. Non-QM loans, on the other hand, don’t rely on traditional income verification methods. This can make interest-only loans attractive prospects for real estate investors and other individuals whose income isn’t accurately reflected on tax returns, W-2s, and other income documents.