Just think about it: a new vacation property in Florida, the perfect spot to rest and relax. You’ve purchased a vacation property as an investment, something you can use personally or rent out to others and earn income.
Florida vacation properties are a great investment option—but is it the right choice for you? Many investors wonder what the best way to purchase a new home or investment property is.
Interest-only loans in Florida are a great option for potential investors. At Starr Mortgage, we’ve worked with many clients to apply for interest-only loans for their Florida vacation rental.
Let’s explore interest-only Florida loans further to know if it’s the best choice for you.
What is an Interest-Only Loan?
First things first—what is an interest-only loan in Florida? Simply put, it’s a loan in which the borrower only pays the interest due for a set period of time. This contrasts with a traditional loan in which the borrower pays part of the principal plus the interest.
Starr Mortgage can help you apply for an interest-only loan on 3, 5, or 7-year terms up to $5 million. At the end of the term, you have a few options:
- Refinance the loan to another interest-only mortgage
- Pay the loan off in full at one time, also called a balloon mortgage
- Convert the loan into a principal and interest payment loan
There are different requirements and terms for interest-only Florida loans, so talk to your mortgage broker or contact us at Starr Mortgage to learn more.
Benefits of Interest-Only Loans for Buying an Investment Property
An interest-only loan in Florida may be the right option for you if you’re looking to purchase an investment property. An interest-only loan is designed for buyers who want to save more money by avoiding paying off the principal right away.
To illustrate the potential savings if you apply for an interest-only loan, consider this example. Someone takes a loan of $1.5 million at 3%:
- Interest-only loan, using this loan calculator: Monthly payments are $3,750.00 (interest only)
- Fully amortized loan, using this loan calculator: Monthly payments are $7,105.31 (principal + interest)
This is a difference of $3,355.31 per month. This additional cash in your pocket can be used to do other things to help your money grow. You can reinvest the extra cash in other opportunities that will grow your wealth so you can more easily pay off the principal later.
Some common scenarios where people choose Florida interest-free loans:
- Investors who purchase property, make improvements and sell it later
- Investors who receive large bonuses at the year-end and therefore prefer to pay off the principal at one time
- Investors who want a higher cash flow over the years and use their discretion on when to pay the principal back
This YouTube video offers a detailed explanation of how interest-only loans work if you want to take a deeper look.
When to Use Other Loan Options
Is there ever a time when you shouldn’t apply for an interest-only loan? Yes, there are—interest-only loans in Florida that may not be the right fit for these types of buyers:
- Investors who are not sure how long they’ll keep the property
- Investors with regular cash flow, where it makes more sense to pay on schedule
- Investors who do not fully understand the implications of a mortgage-only loan
Mortgage-only loans are not for everyone, which is why you should consult with a professional. Contact us at Starr Mortgage to learn more and apply for an interest-only loan in Florida today! We love seeing investors and home buyers reach their real estate dreams.