Compare Interest Only Mortgage Rates!

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Interest Only Mortgage Rates

In an interest only mortgage loan you have an interest only payment option attached to it in the contract note. You only pay the interest on the mortgage that is stated in the note for a fixed period of time.

For example, if you have taken an interest only mortgage loan for 5 years you only pay the interest on your mortgage for 5 years. After the completion of 5 years the unpaid balance is fully amortized over the rest of the period by paying the interest and the principal to the loan company. It then turns into a regular long-term mortgage loan where you have to pay the interest and the principal amount. The interest only mortgage rate is an adjustable rate determined by the current interest rate.

Mortgage rates and interest payments

As stated above, you only make interest payments for a fixed period of time. During fixing of the terms, you have to state in the note the margin that will be added to the future interest rate after the fixed period is over. This preset margin will stay fixed throughout the remaining term of the loan while the interest only mortgage rate added to it will change (generally on an annual basis) with the fluctuation of the current index rate.

For example You take a 5-year interest only loan, and the interest payable will be the current interest rate plus the margin of 2.25%. Thus, after completion of 5 years, during month 61, if the current interest rate is 2.50%, you'll be paying 4.75% interest till there is a change in the current index rate. So after the interest only mortgage payment period is over you will be paying the adjusted interest only mortgage rate and the principal, which will increase your interest only mortgage payments.

No negative amortization

Loan programs that have interest only mortgage rates are ones where you pay a fixed rate of interest for a fixed period of time. They do not contain any features of negative amortization, as there is no deferred interest during that fixed period. Option Arm and Cash Flow loan programs are two examples of home loans that carry negative amortization.

Long-term

Typically interest only mortgage loans are short-term loans unless your risk profile is high. But these loans carrying interest only mortgage rates are a good opportunity for many wanting to buy homes. For instance

  • Individuals in high-income brackets - For consumers who want to invest their money in the market and not lock it by purchasing property. They expect better returns from the markets than the returns on the property.
  • Young professionals - Youngsters, who may have lower income at present but expect substantial increase in their income in the future, would like to use their purchasing power by getting a home loan with interest only mortgage rate. For example, lawyers, architects, doctors, etc.
  • Short-term home owners - Consumers who take short term loans are more concerned with payments than equity since they know that they can pay off the loan within a short period of time. This pofile prefers to go for a loan that has interest only mortgage rate.
  • Investors in property - Consumers who take these interest only mortgage loans invest in real estate when they know that the capital appreciation in property is going to be faster than other investments.

An interest only mortgage loan can be taken by anybody, but it may be more beneficial to a certain profile of customers. If an interest only loan suits your needs discuss all the pros and cons with your financial consultant, and then go ahead and contact a mortgage lender for the loan.

Fixed period of time

In an interest only loan your interest only mortgage payment is the same for a fixed period of time. It could be a 3,5,7 or 10 year interest only mortgage loan. For example If you take a 5-year interest only mortgage loan, the interest only mortgage payments are made for the first 5 years only, after which your interest only mortgage payments will consist of the principal and the interest. The interest only mortgage rate will be computed by adding the current rate of interest and the pre-determined margin.

Interest only mortgage calculator

Use our interest-only mortgage calculator to calculate your payments.

Three Steps to Lower Your Interest Rates

A common misconception is that the rate on your credit card is fixed in stone. The reality is that you have the power to lower the rate on your cards. But no one is going to offer you a lower rate out of the blue. It's up to you, the savvy financial consumer, to ask.

Haggling for a low price is an American pastime. Haggling for a low interest rate, however, is not quite as common. Yet for millions of Americans who are saddled with credit card debt, this can be an easy way to save money. There are ways to lower the interest rate you're currently paying on your debt; but only you can initiate them.

Step 1 Call your credit card company

Credit card companies will go to great lengths to keep you as a customer. This includes lowering the interest rate on your card. But they won't do it unless you ask. Many people instinctively flinch at the thought of haggling with a lender for a lower rate; but the process can be surprisingly simple.

All you need to do is call your creditor, tell them that you have an offer for a lower rate elsewhere, and ask if they'll match it. Most companies will be eager to keep you as a customer and they'll lower the rate. If they refuse, move on to Step 2.

Step 2 Go with the other guy

It's hard to find an American who hasn't received solicitations from credit card companies. A typical American sometimes gets two a day. Instead of chucking them into the recycling bin, comb through them. You're more than likely to find one that carries a lower interest rate than your current plastic. You should also go online and search for credit cards. There may be an offer out there that beats your current interest rate.

A word of caution Make sure that you're crystal clear on the specifics surrounding a new card. You'll want to know the interest rate, the balance transfer rate, and any fees that may be included with the card.

Step 3 Check your current cards

Store credit cards are notorious for high interest rates. You can realize immediate savings by transferring the balances of virtually any store credit card to a different card with lower interest. Keep those store cards, but make sure that you use them wisely in the future. Pay with them if you'd like; just be sure to pay off the balance in full at the end of every month.

As a consumer, you reign supreme in our society, but only if you advocate for yourself. There are plenty of different ways to lower the interest you're paying on your credit cards; but it's up to you to take action. Ask for a lower rate, and transfer your balances if you don't get it. It's the American way.

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National Rates

Loan Type Today +/-
30 yr fixed 3.72
15 yr fixed 3.04
5/1 ARM 3.05

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