What Is the Typical Interest-Only Mortgage Length
The interest-only home loan provides a unique feature. It allows the homeowner to pick an interest-only period. This period takes place in five-year increments. Most banks allow the homeowner to pick two periods for a total of 10 years with interest-only repayments. The typical interest-only mortgage length is 30 years.
Homeowners pick the interest-only period to give themselves time to get their finances in order. Investors use this mortgage to purchase properties and keep their overhead costs low. Before the interest-only period expires, they sell the home or find a tenant.
Interest-only mortgages remain interesting to homebuyers for several reasons. The downside is that during the interest-only period, the homeowner does not chip away at the principal unless they send extra repayments.
For example, a $500,000 mortgage with a 3% interest rate over 30 years has a monthly repayment of $2,108. If the homeowner opts for an interest-only period, the repayment drops to $1,250. This affords them time to save, rework their finances, or prepare the home for sale.
A homeowner can apply for an interest-only mortgage with a 30-year loan term. During those 30 years, they can pick two 5-year interest-only periods. If they pick them back-to-back, the homeowner can obtain a new mortgage before the period expires. It’s also possible to sell the home. Refinancing your home loan might become an option too.
Interest-Only Mortgage Length Conclusion
The interest-only mortgage length is 30 years in many cases. The interest-only portion occurs in five-year increments. To obtain more details about this home loan option, contact our Mortgage House loan specialists today.