In today’s housing market, there are many types of loans out there. They generally fall into two categories. One type is called a fixed loan, where the bank or financial institution sets a fixed amount the lendor must pay each month for the house or commercial property. The other type of loan is called an adjustable rate mortgage, or an ARM. Under ARMs there is a type of loan that is called an interest only loan.
This loan is self-explanatory, in that the lendor is given the option to pay interest only on the loan. The bank usually sets a specific amount of time for this option, it can last anywhere from five to ten years. This allows the lendor, who may have a tight financial situation for that fixed time, to pay less each month for the property.
It is important to note that the principal portion of the loan does not disappear during this period of time. The core of the loan is deferred and added to the overall amount the lendor owes. So for those who opt to do this, the interest only payment, it needs to be understood that it will take longer to own the property this way. Using an internet banking service like the online Orchard bank service is also a good option to manage and check loan interests.
This option is also suitable for those who see the property as a starter one, that they will not be in it forever and can sell and upgrade. It may also be the only real option for a new couple or family just starting life, with limited incomes. It is also good for the real estate investor, who is buying the property as an investment as he or she will want to turn the property over in a short time.
It is not good for those who want to own the property quickly, for it will take longer to achieve that goal.