How to Buy a House Effectively and Cheaply

Buying a house on low credit is no longer a dream because buying a house with a low credit and buying a house with a proper credit have become one and the same recently. Many years ago people with a low credit rating thought it was impossible for them to attain a good house. But recently many programs came into existence to help the people with poor income and bad credit to purchase a house with no down payment at all. Interest only loans are the best among all these programs.

How to Buy a House Effectively and Cheaply

What are Interest-Only Mortgage Loans?

Interest only Mortgage loans have made their progress in the early 2000’s. They have got a very good and unique concept style. Generally a monthly mortgage payment loans are divided into two portions. One portion of the payment is made towards the principal balance and the other portion of payment is made towards the interest. It is required that you pay a certain amount of money every month so that you can clear off the loan in a period of 15 or 30 years.

On the contrary if you have an Interest only Mortgage Loan then you will be paying only interests for the first few years. The period for which you pay the interest varies. The home owners have a choice of selecting among three, five, seven or ten years interest only loans. After this period of interest paying ends then the house owner will be paying for both the prime balance and the interest.

Advantages of Interest Only Loans

The best option for buying a house in a booming house market is opting for an Interest Only Loan. Initial mortgage values are very much low. Let us consider that you take a loan of $200,000. If you opt for a monthly mortgage loan then you have to pay $1200 a month while the amount is only $800 per month for an interest only loan. Therefore affordable living is possible with the interest only loans.

Cons of Interest Only Loans

The original amount will not be reduced in the initial years because you will be paying for the interest only in the starting years. When you start paying for the interest and the main balance then the rates may go up by nearly 40%. It is very difficult to cope up with a mortgage increase. Interest only Loan is not a good option if you have decided to stay in your home for a long time. On the contrary if you have a great income coming and can easily cope up with the mortgage values then you can get the best out of this loan.

Another best option is selling your house before the interest-only period ends. You can only opt for this if the housing sale in your area goes up so that you can earn money from your selling after clearing your loan. But if the house market in your area goes down then you can not sell the house and capitalize from it.

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