What is a 30 Year Interest Only Mortgage?

A 30 year interest only mortgage is a mortgage in which, for a certain amount of time, you only pay the interest payments. You usually will not have to pay the principle for the first few years of the mortgage and this tends to last for only those first few years. This is ideal for helping you buy the house you want even if it is a bit more money then you want to pay. Since you are only paying interest at first you can get away with overspending, for only a brief window.

How Long You Will Be Making Interest Payments

With a 30 year interest only mortgage you will usually spend about the first five years paying interest only. The rest of your principle payments will be made over the next 25 years. You will end up paying the same amount of money and you will be paying more per month during those 25 years because of the lack of principle payments the first five years. However, with only paying the interest the first five years your loan payments become less, which helps you afford potentially a more expensive house and mortgage loan during which you would be otherwise paying a normal mortgage. When the interest only portion of the mortgage expires you can always refinance to a favorable mortgage, if you find this becomes a better option. That is something you can only decide when it comes to that point. Interest only mortgages are a good tool for offsetting high priced homes. Just make sure it is right for you.

Mortgages vs Your New Home

Depending on how long your interest only mortgage is should be a factor in how much you should spend on a new home. If you get a ten year interest only loan it is reasonable to buy a more expensive house. Since your loan payments will be substantially lower for the first ten years, you won’t fall into debt as easily. Even though the monthly payments will rise in ten years it is reasonable to assume you will be making a higher yearly income at that point and can afford to pay off the rest of that mortgage. If that point comes, and you are not making as much money as thought you might, then you can always look into refinancing. If you qualify for an interest only mortgage then it is a very good way to go about getting a mortgage.

Find What is Right For You

The details of your mortgage is only something that you can figure out. You need to do your research and see what really works best for you. You can take advice from people, but do not let them make your decisions for you, unless you are certain it is what you want to do. Only you are truly aware of your situation, and know what you can handle. The quickest way to find yourself in trouble, is to take advice from someone who really does not know what you can afford. Just be aware, and everything will work out great.