Quick Tip: Interest Only Mortgage Financing

What is Interest Only Financing?

Interest Only Financing is a finance option where the borrower only pays the interest on the mortgage through their monthly payments for a specified period of time.

Advantages of Interest Only Financing:

• Monthly payments are lower than conventional loans (this is short lived)
• This is an opportunity to pay off the loan faster
• Flexibility in making over payments with unexpected funds
• Free up Money
• Keep Cost down

​Disadvantages of Interest Only Financing:

• Dangerous
• Housing prices fall (if the plan was to sell while paying only the interest)
• No equity
• Putting off inevitable

The biggest disadvantage to Interest only financing is that the payments are not deductible. You can't write off these payments= no decrease in tax liability.

Sum this up!

​Get a mortgage you can afford and avoid the interest only payments unless you are an investor and can afford to take the risk. I actually recommend buying a house that you will need to fix up, this way you get the house on less and you can make the improvements and renovations overtime. You may need to work on getting your credit score up and reducing your Debt to Income (DTI) all these are key factors in your interest rate.