INTEREST ONLY MORTGAGE RISKS: Beware Of This

soft-landingIn the world of business, decisions are not made impulsively because every tick and signature signifies an agreement and the terms begin to operate from that moment.

Interest only mortgage

Interest only mortgage is the type of mortgage where the loan received by a mortgagor is not paid or added to what he is paying immediately. Instead, he starts by paying back the interest usually not lasting more than ten (10) years. After paying back the interest, the principal ammount still remain as a standing debt for him which he would then pay in a lump sum. Here, mortgager (borrower) is required to first pay off the interest on the money borrowed.  This seems quite affordable and comfortable at first, in that, the individual only pays back the interest for a maximum of ten (10) years. After that time is reached based on the terms of agreement, the individual eventually pays the principal amount back in lump sum which returns him back to square one.

The risks are thus;

At the end of the agreed number of years, the money may still not be available to be paid back which could lead to bankruptcy. Sometimes, there may be a pan, usually by the mortgagor, but some inevitable circumstances may lead to the money being tampered with because there are no restrictions placed by anyone on the funds and how they should be handled.

Investors use this as an opportunity. Check this out (www.newcityfinancial.com for more info).A mortgagor  who is operating under the variable mortgage rate, if the interest rates increase, he will definitely end up paying way more along with the bulk principal capital. ][You are practically still where you are or rather where you should have left. How? You still owe the capital of which if it was the repayment mortgage, as at 5 years, you should have paid about one-sixth of the whole money including the interest.