Interest only mortgages benefit certain homeowners for a variety of reasons. It is important to understand the risks associated with interest only adjustable rate mortgage before signing up for one. Here are several situations where an interest only mortgage makes good financial sense.
1. If you are self-employed or have sporadic income that you cannot document having a mortgage loan with the lowest payment amount possible would benefit you.
2. You are in a situation where you have lost part of your monthly income. Losing your job for example, an interest only mortgage could help keep your finances afloat until you find employment.
3. If you are a real estate investor seeking temporary financing while you sell a property. Interest only mortgages are ideal for short term financing of this type.
If you need the lowest mortgage payment possible, an interest only mortgage will typically reduce your monthly payment by 10 percent or more. To learn more about your mortgage options including common mistakes to avoid, register for our free mortgage guidebook.