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Interest Only Real Estate Investor Mortgage Loans

From Christopher Smith, for About.com

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Interest Only Mortgages - A Popular Choice During High Appreciation Periods

The interest-only mortgage has become a popular choice for investors in areas in which rising property values have made finding positive-cashflow investments particularly difficult.

An interest-only mortgage loan allows an investor to defer principal payments for a predetermined period, generally from three to ten years. During this time period, the borrower pays only interest. After the initial period has ended the loan is re-amortized in order to pay off the principal over the remaining years. At this point, the investor has a few of options: pay the increased payment, refinance the loan, or sell the property.

Example: 30 year interest only loan on $100,000 at an interest rate of 7.0%:

• Interest only payment: $583/month, $7,000/year
• Conventional payment: $665.30/month, $7,984/year
• Savings over the first ten years: $82/month, $984/year

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