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Interest-only loan vs. Mainstream funding

Interest-only loan vs. Mainstream funding

Posted: Dec 13, 2005 12:00 a.m. ET

Final Modify: 12/13/2005

Dear Dr. Don,

I’m enthusiastic about purchasing a true house and wanting to keep my mortgage repayment as little as feasible. The mortgage company i will be working with has suggested an interest-only home loan for the very first 5 years then refinancing from then on. I would personally nevertheless place $500/month towards principal. Would we spend less fascination with the long term than if I’d struggled with all the monthly premiums with a regular home loan right away?

Dear Laurie,

The month-to-month mortgage repayment for a regular fixed price home loan is self-amortizing. Meaning that the payment per month contains both the month-to-month interest cost and a share to principal enabling the home loan become paid down throughout the life of the mortgage.

An interest-only home loan does not have the key repayment component, at the very least maybe perhaps not into the very early many years of the mortgage, you to minimize your monthly mortgage payment so it allows. Devamını oku