Frequently Asked Questions
What is your margin when the fixed rate is over?
This really depends on
the lender and the product offered.
Variable rate mortgages are based on a
number of factors to asses the lenders
particular risk profile for the program.
What does this mean to you? It means
once your initial fixed rate period is
over you will be subject to the measured
index of your mortgage product plus a
pre-defined margin. For example,
If you were to be coming out of a six
month libor loan today your rate would
be much lower than traditional fixed rate
loans. The LIBOR index is currently
around 1.30 so if you had a margin of
(1.25%) you would have a current fully
indexed rate of 2.55% for your mortgage!
Of course, this rate will change monthly
or annually so consult
with a LIBOR mortgage professional
to learn what libor programs are currently
available.
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What Index will my Interest Rate be adjusted to?
Most "Interest Only"
loans are tied to the LIBOR index - LIBOR
is an abbreviation for "London Interbank
Offered Rate," and is the interest rate
offered by a specific group of London
banks for U.S. dollar deposits of a stated
maturity - however some are also tied
to the one year CMT. To learn more
about the program specifics please consult
a local mortgage professional by clicking
here .
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Can I convert to a fixed rate?
Most "Interest Only"
loans do not have fixed rate conversion
options but product features and guidelines
change daily. To learn more about
the current program specifics please consult
a local mortgage professional by clicking
here .
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Are these Balloon Mortgages
No. Most "Interest
Only" loans are not balloon type mortgages.
Those that have a longer initial fixed
period such as the 3,5,7 and 10 year
programs will not have the note due and
payable at the end of the fixed term.
The mortgage will simply turn into a fully
amortized loan thus your balance (after
5 years on a 5 year fixed interest only
loan) will be amortized over the remaining
25 years as a normal 25 year "principal
and interest" mortgage would except at
an adjustable rate. To learn more
please consult a local mortgage professional
by clicking
here .
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Do Interest
Only Loans have Prepayment Penalties -
If so, How do they work?
Most "Interest Only"
loans do not have prepayment penalties
however there are certain advantages to
taken a prepayment penalty. The
option will depend on your application
profile and the lender you choose but
you may be able to save up to 0.25% on
the rate just by taking a prepayment penalty
for the first 3 years. To learn
more please consult a local mortgage professional
by clicking
here .
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How Does Interest Only Loan Quotes compare to my local bank?
IOBL is like having over 107 "Local Banks" to choose from without having to do the leg work yourself. Often times banks differ as to the types and sizes of loans they would like to lend on. IOBL does all the leg work for you by matching you up with the ideal lenders for your individual situation.
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What
happens when the initial fixed term is
over?
Typically when the initial
fixed term is completed, your new rate
is determined by taking the index plus
your margin. For example if your margin
is 2.75% and your index is 1.75%, your
new fully indexed rate would be 4.00%.
This can then change monthly, bi-yearly
or yearly depending upon the product you
have choosen.
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What
are the benefit of doing an interest Only
Loan versus a PrincipleAndInterest one?
The beauty of doing an interest only loan is that it puts the borrower in control of how much principle is paid down while allowing for a reduced monthly payment. When doing a principle and interest loan, the bank determines how much principle is applied each month to your loan balance leaving the borrower with less options.
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What
happens if I decide to do a 5/1 ARM and
then two years in I want more security?
Just because you do a 3/1, 5/1 or 7/1 ARM does not mean you can not re-finance before your fixed term is complete. Most Adjustable Rate Mortgages do not have pre-payment penalties and allow for borrowers to refinance at their discretion.
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What
happens if my monthly payment is $1,000.00
per month and I want to pay more?
Any amount paid above and beyond the minimum payment of $1,000.00 will go directly towards paying down your principle. For example, if you were to pay $2,000.00 ($1,000.00 above the minimum) for a single month then your loan balance would decrease by $1,000.00 the following month.
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