Interest only mortgage refinance rates provide information to consumers on the percentage that will be required on this type of home loan. These numbers are not necessarily lower than a mortgage refinance without the interest-only option. Misconceptions are plentiful when it comes to these rates. One common misconception is that interest-only loans are a type of mortgage, when in fact they are merely an option that can be attached to any type of mortgage. Many consumers believe that the rates will be lower since there is no amortization for a specified period. This is not necessarily true because the risk of default is higher on loans that amortize more slowly.
Saying that percentages are lower than traditional refinance rates is like comparing apples to oranges. ARMs, or Adjustable Rate Mortgages, have lower fixed rates than FRMs, or Fixed-rate Mortgages, without the interest-only option. But, an ARM with this option does not have a lower rate then the identical ARM without it. The interest-only option is available on both Fixed-rate Mortgages and Adjustable Rate Mortgages, so choosing an ARM just because of this option might not be a wise decision. The consumers decision should be based on how long they intend to have the loan and the level of risk they are prepared to accept in a possible future rate increase. It is vital for the individual to explore all options before settling for interest only mortgage refinance rates.
These numbers will reduce the monthly payment by a considerable percentage, for a specified period of time, such as five years. After making the monthly payment for the five-year term, the principal balance is the same as when the loan originated because the payment consists of interest only mortgage refinance rates. In the 1920s, interest-only loans were considered to be the norm. Homeowners usually refinanced at term providing the home had not lost any value and the borrower maintained steady employment. When the depression hit in the 1930s, a large portion of these loans went into foreclosure. The lenders simply stopped writing them and have not brought them back as a primary loan option. Lenders want loans that will eventually amortize.
With this type of program, the rates are solely dependent on the current interest rates and the credit history of the borrower. It is important to remember that this type of refinancing option is not a stand-alone but can be combined with most any type of refinancing loan package. Since the interest-only option would prevent the loan from amortizing, you will have a lower payment for a specified term, but the individual should be prepared to accept a higher monthly payment when the term is up. When thinking about interest only mortgage refinance rates, it is important to understand that the longer the interest-only period, the larger the monthly payment will be when that period ends. "Discretion shall preserve thee, understanding shall keep thee" (Proverbs 2:11). Understanding the differences in these programs can be difficult for a person so it is important to ask God to provide discretion.
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