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Home Loan and Home Loans
Home loans are available in a variety of different mortgage packages, and homes loan agencies and mortgage companies are offering exciting and competitive mortgage options to homebuyers. Getting a home loan has never been easier, and even those...
Let Us Uncover The Mystery Of Secured Loans
Okay, so one day you wake up and realize that you are far away from understanding your finances, let alone managing them. Finances are a gamble where you ought to win. If you lose you lose everything - whatever you have build, you have bought, you...
Logbook Loans to Cash-Out the Worth of Automobiles
Logbook loans cannot compete with other loans in terms of the
time span for which they have been in use, given their recent
entry in the financial market. Nevertheless, logbook loans have
left the other loans far behind in terms of popularity....
PayDay Loans - Watch Out For Automatic Renewal of Loans
PayDay Loans - Watch Out For Automatic Renewal of Loans When you chose a payday loan company that you would like to borrow money from, pay very close attention to their policy of loan renewals. Some companies will deduct the entire repayment due on...
What You Need to Know About Debt Consolidation Loans UK
Should you find yourself over your head in debt, you might want to start looking into debt consolidation loans UK . These loans are designed for the person who needs help in taking care of their outstanding debt, keeping them from bankruptcy. Much...
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Interest-Only Loans Can Buy More House and More Trouble
They're spreading like wildfire--interest-only mortgages appear
to be the panacea for rising home prices and the incomes that
can't quite catch up. You can buy "more house" and have a low
mortgage payment and a big tax deduction. Who wouldn't want one,
right?
Well, a large number of consumers are getting into these loans
when they shouldn't. Interest-only mortgages work well for some
individuals and are dangerous for most others, yet the number of
interest-only loans is rising rapidly.
Take a look at San Diego. In 2004 almost half of the mortgages
required interest-only payments in the first few years according
to a study done by LoanPerformance, a San Francisco--based real
estate information service. Could this have something to do with
the housing market? You bet it does. Are home prices rising
faster than salaries and incomes? They sure are. So how is one
supposed to afford a house in such an expensive housing market?
You guessed it--an interest-only loan.
Interest only-loans were originally aimed at more sophisticated
investors who wanted to leverage their income by re-directing
what would have been the principal portion of their payment to
higher yielding investments that exceed the rate of their home
appreciation. These types of investors typically have more
assets and financial discipline than most and therefore aren't
as likely to get in as much trouble with such a loan.
Today, interest-only loans are being utilized by borrowers who
are trying to leverage debt. What they are doing is getting more
debt for their buck; they're borrowing more money but keeping
their payments low (initially) in order to compete with other
buyers in sellers' markets. Here are some of the potential
dangers that
face such borrowers:
* If the principal balance isn't being reduced, than no equity
is being built, and if home prices are stagnant during the
interest-only period and the borrower needs to sell, he'll need
to be able to pay sales costs out of whatever equity there is in
the house, if there is any. Remember, mortgage amortization is
in the borrower's control, appreciation is not.
* If there's a downturn in home prices, the borrower could end
up "upside down," meaning the mortgage balance on the property
could end up being greater than the property's market value. In
this case, the borrower would be responsible for sales costs and
the remaining mortgage balance which could lead to foreclosure.
Interest-only mortgages make sense for borrowers:
* who have seasonal incomes or earn commissions and/or bonuses
and have a desire to pay on the principal when it's convenient.
* upwardly mobile individuals who expect to earn more in a few
years and want to buy "more house" early on rather than later.
* who intend on investing their cash flow in higher yielding
investments or paying down high-priced debt.
Make sure you know what you're getting into with an
interest-only loan. Consult with your mortgage broker or lender
to know what the possible repercussions could be, and be sure
you're getting the loan for the right reasons. Eventually, you
want to own your home, and it's better to be planning on that
sooner than later.
About the author:
Brian Daniel is a loan officer for
http://www.bendmortgagegroup.com, a mortgage company in Bend,
Oregon. He is also the company's marketing coordinator. For more
articles visit http://www.bendmortgagegroup.com/Articles.
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