Interest-only mortgages

Make sure you understand the terms of an interst-only mortgage before you sign.

How interest-only mortgages work
When you take out a traditional mortgage, you pay the lender a monthly amount that’s a blend of principal plus interest. The principal goes to repayment of the money you borrowed. The interest is what the financial institution charges for the use of the money.

When you take out an interest-only mortgage, you pay only interest every month for a fixed period of time -- usually the first five to 10 years. Then, depending on the term of your mortgage loan, you have 20 to 25 years to repay all of the principal, plus interest. You can pay money toward the principal during the interest-only period, but make sure your interest is recalculated on the new balance.

An interest-only loan could be ideal for you if you want to keep your monthly payments low and are not concerned about falling home values. Refinancing with an interest-only mortgage is an idea you might want to consider if you are experiencing a temporary financial squeeze -- if, for instance, you or your spouse has chosen to go back to school, or one of you has decided to take a few years off with your children. Paying only interest for a few years could help you to stay in your current home, even though you can’t make your conventional mortgage payments for the time being. Of course, remember that you will only be paying interest during that time and not paying down the principal of the loan.

Your payments rise later
When you take out an interest-only mortgage, whether it’s for the purchase of a new home or to refinance your current home, you must bear in mind that when the five- or 10-year interest-only period expires, your payments will increase. In fact, they will be much higher than if you had taken out a conventional mortgage. This is because you must now pay off the principal in a much shorter period of time.

So before you opt for an interest-only mortgage, make sure that you will be able to afford the higher payments you will face in five to 10 years, or you will face refinancing -- possibly at a higher interest rate -- or selling your home.

2009 Home Mortgage Interest Predictions

Predicting the home mortgage interest rates for 2009 can seem hard to do, but the truth is we have a pretty good idea of what to expect. Whenever someone is purchasing a home or getting a loan modification or refinance, knowing when the lowest rates are available can save you hundreds per month on your home loan. Here are my predictions for mortgage interest rates for 2009.

Only a few weeks ago, the national home interest rate average has increased by about .5% all across the country. This was accurately predicted by me in earlier articles, and I think I know why this happened, and what will happen next.

I thought that interest rates would be increased by about .5%, and they were, as a response by mortgage lenders and banks to ease the massive amount of homeowners looking to refinance or get a home loan modification. This way, the lenders and banks can separate homeowners who truly need to save their home from foreclosure or mortgage default, and those homeowners who are just looking to save money. This temporary rate increase was issued in order to catch up on existing applications and approvals which have continued to flow in since Obamas announce of his "Making Home Affordable Plan" in March.

This "Making Home Affordable Plan" allowed homeowners to get a 2% home mortgage refinancing or modification. This was made possible by the Government providing over $75 billion in cash incentives to lenders and banks who approve homeowners who are "at risk" wither credit wise, or of losing their home. As a result a large number of applications came in and the paperwork was overwhelming.

However, as 2009 continues and the mortgage lender and banks catch up on their existing customers, they will look to lower interest rates by .5% or so. I predict that this will happen around mid October, and leave the average 30 year fixed rate mortgage with a 4.69% interest rate. The mortgage lenders and banks will be hungry for more customers looking for a refinancing or mortgage modification yet again.

If you can wait a few months do so. However if you are facing foreclosure or are in a bad financial position, take action now to prevent losing your home.

At my site I will teach you how to properly refinance or modify a home mortgage saving you thousands of dollars, or even your home. A lot of Greedy Mortgage Lenders will try to suck you dry if you let them. Learn the right way to refinance or modify your home loan at my site: http://www.refinancingcondo.com

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