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Learn how to Calculate Interest Only Loan Payments
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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a Quote
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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a Quote
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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a Quote
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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a Quote
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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a Quote
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