Purchasing real estate can be complex, especially if it’s your first time. There are so many details to figure out, and everyone has opinions on what you should do! Undoubtedly, figuring out your mortgage is the most important—and most complex—part of purchasing a home. But that’s what we’re all about at Starr Mortgage Company—helping you get the right mortgage for your home purchase.
We believe that the more you know, the better decision you can make. So, let’s dive into a topic that might be new to some people: interest-only loans. Here’s everything you need to know about them!
What is an Interest-Only Loan?
An interest-only loan is a type of mortgage in which the person taking the loan only needs to pay the interest for a certain period of time. This differs from a typical loan where you pay back some of the principal (the loan amount) plus the interest owed. With an interest-only loan in Florida, the principal is repaid at another time, usually in a lump sum at a specified date.
Here are some features of interest-only loans:
- Interest-only payments are made for a specified period of time, usually 5, 7, or 10 years.
- This arrangement is often available to only some buyers. Qualification requirements typically include higher down payments, low debt-to-income ratio, and good or excellent credit scores.
- Interest rates can be structured as adjustable-rate or fixed-rate loans.
Pros and Cons of Interest-Only Loans
Like most things, there are some pros and cons to consider for an interest-only loan in Florida. The biggest pro of an interest-only loan is that you are paying less money to start. This allows first-time home buyers or others who are concerned with their finances to defer larger payments until later when they have a higher income.
The main disadvantage or con of an interest-only loan is that the homeowner does not build up any equity. Equity can only be built when the principal debt is paid back.
The other con is that your payments jump significantly when you need to start paying back the principal loan. If your financial situation changes, it might not be possible for some people to sustain the payments.
Florida Interest-Only Loans: Starr Mortgage Company
Interest-only loan payments will work for some people and not for others. It’s important to review your financial goals and expected cash flow in the future to determine if it will work for you.
But you don’t have to figure it all out yourself! Starr Mortgage Company has experience with interest-only loans in Florida. We can help you get an interest-only loan in Florida for 3, 5, or 7-year fixed periods so that you can start working towards your dream home!
If you want to talk to us more about interest-only loans in Florida to see if they’re right for you, don’t hesitate to reach out. Contact us and request a quick quote so we can learn more about what you’re looking for and how Starr Mortgage Company can help you!