The results from our most recent poll of financial experts is in and they are in agreement, if you are searching for a new mortgage loan or looking to refinance, then it is recommend for almost every borrower to get a traditional principal and interest loan product. Finding interest only loans in 2015 is again possible, despite the fallback from their impact on the housing crisis just a few years ago. Many consumers are turning to interest-only loans, where you pay only the interest on your loan for the first few years instead of paying both interest and principal.
Interest-only loans are touted as perfect for those consumers who don’t plan to remain in the same house for more than five years, or who know their salaries will notably increase in the next few years. The reasoning behind this is that you start with lower monthly payments, so you either can save money to buy a bigger house, or save the heftier payments for when your salary increases.
However, be wary of interest-only loans. After the initial five-year period, your interest rate may increase. So you could end up paying more than you would if you had chosen an interest and principal paying mortgage at current low rates.
Furthermore, while you will have lower monthly payments at first, you are not paying any of the principal of your loan. So the only equity you’re building in those first years is based on rising property value, or any extra payments you may make.
Instead, consider getting a traditional loan through your local bank or credit union. Dealing with a professional and unbiased loan officers can help you find the right loan for your situation and when in doubt ask a financial advisor or credit counselor for additional advice.