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Home Loan: The Interest Only Loan
by Mestrutore Mestico
http://www.fondhome.com
The Americans have been able to fulfill their dream of
owning a home, thanks to the lenders who have relaxed their
conditions tremendously over the past few years. Now you can
buy a home with down payments as low as five percent as
against ten percent. According to the relaxed income
standards the home payment can be as much as 35 percent
compared to 28 percent of the monthly income as it used be.
Thus, it is much easier to buy a home. However, it's the
interest only home loan that has caught many young couples
in the net of the lenders because they are enamored with the
short-term gains losing sight of the long-term difficulties.
The interest only home loan appears to be so attractive
because it requires very low payments at the beginning. You
pay not more than $300 to $400 per month initially for seven
to ten years. It helps you buy a home and pay for it
comfortably. While it sounds good and feels nice for a long
time, after the first few years you find yourself in a bind,
especially, if your income hasn't increased remarkably. You
will find it difficult to match up with the house payments.
The interest only home loan is a snare, which catches many
an unwary couple. After the initial period of seven to ten
years is over, the buyer has to start paying on the
principal.
This means a sudden jump in the monthly installments. Often
the payments go from very low to quite high, sometimes as
high as $1,000 to $1,500 a month. This is a situation that
takes a heavy toll on the family finances. Having got
accustomed to paying allow monthly installment you are
suddenly faced with a high payment. If you have done well in
life and your income has increased many times, it's all very
fine. But, if not, there is big trouble. You might even lose
your home.
Even though an interest only home loan can help get a first
time buyer into a home he or she would not otherwise have
been able to afford, the possible consequences may not be
worth the risk. Before getting an interest only mortgage,
it is important for the home buyer to carefully consider
her or his options and make sure that there is complete
understanding with regard to the terms of the loan. And it
is important to take care to ensure that one will not find
oneself with more house than is actually affordable.
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