Interest only mortgage rates are usually based on fixed repayments. However, there are some cases when they are based on adjustable-rate payments. Regardless, interest-only mortgage rates are always linked to the libor index.
Libor stands for London Interbank offered rate. It is a fancy term that demonstrates the interest rate offered by certain groups of banks in London, as they relate to matured US dollar deposits. There are a number of benefits associated with interest-only mortgage rates. In this article, I will discuss some of those benefits with you.
With interest only mortgage rates, you have a greater purchasing power. Typically they will have lower costs than fixed rates or other similar loans, which gives you extra money to work with, instead of having to spend it on higher monthly payments. In addition, interest-only mortgage rates open the door for qualification for other loans, so you can purchase more real estate properties.
Additionally, you will enjoy a more flexible payment schedule with an interest only mortgage rate. Oftentimes lending institutions will not put any restrictions or penalties on this type of loan if you start paying off the principle. The reason that many institutions do this is to give you more of an incentive to take out an interest only mortgage rate.
In addition, interest only mortgage rates will reduce the income you need to have in order to qualify for the loan in the first place. No matter the case, you can usually qualify for for this loan as long as the interest rate is fixed for three years or more.
With an interest only mortgage rate, you also have better control over cash flow. That is because there are no restrictions, like there are on fixed rates. You can cash out how you desire during refinancing.
