What Happens When an Interest-Only Mortgage Matures?
Some financial circumstances benefit from the interest-only home loan. However, it’s important to understand the unique features it carries. This mortgage is an investor favorite. It keeps overhead costs low for the first five to 10 years. After that period, the interest-only mortgage matures. Then the monthly repayments jump to include principal. The good news is that a cap on the home loan interest rates increases. Nonetheless, repayments can double.
For example, the interest-only repayment on a $550,000 mortgage with a 3% interest rate over 30 years nets $1,375. The regular repayment on the same loan terms is $2,318. Since the homeowner only pays interest, the repayments can increase more. During the interest-only period, the homeowner does not chip away at the principal.
Before the interest-only period expires, the homeowner must get in touch with their lender. Either request an extension or fill out an application for a different home loan. A third option is to do nothing & start reducing the principal loan balance over time. Investors who pick this mortgage often fix up the property. Then, they sell it or they find a tenant.
Mortgage House works with a range of clients. Our loan specialists have access to innovative tools that help them find the best products for most applicants. Discuss your financial goals with us.
Interest-Only Mortgage Matures Conclusion
Homeowners must take action before an interest-only mortgage matures. This ensures that they receive favourable loan terms after the interest-only period expires. Our Mortgage House loan specialists work with homeowners and investors. Contact our team today.