The Interest Only Feature

    Interest Only Loans have become one of the most popular products in the lending industry.  This is because in many cases they offer home owners the lowest monthly payments.

    Interest Only refers to a feature that can be attached to a loan.  This feature allows for the borrower to pay ONLY THE YEARLY INTEREST in twelve separate installments. Most products in the business have this potential option available depending on a borrower’s credit profile.

For example, payments for a $100,000 loan at 6% “interest only” would be computed as:

               $100,000 x 6% = $6,000 per year divided by 12 months = $500 per month payment

·            In contrast, the same traditional $100,000 loan at a 6% rate without the “interest only” feature would have a payment of $599 per month, or 20% higher.  This 20% difference is the normal ratio for an interest only loan when compared to a traditional loan with the same rate.

    Looking at the above figures, it becomes apparent that this feature can be used to accomplish specific goals.  Your Mortgage Banker at Liberty National Funding can help you identify when this feature would be a good enhancement to your current or future mortgage situation.

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