How are payments adjusted on an "interest only" mortgage?
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I am considering refinancing my home. My two year ARM is about to expire. I am thinking about getting an interest only loan and making "principal only" payments in addition to the scheduled "interest payment". This should allow me to reduce the principal much faster than following the amortization schedule that would come with a conventional 30 year fixed mortgage. If I do this I will be reducing the principal and correspondingly the interest due each time I make a principal payment. How do finance companies adjust the monthly interest payment, when the balance due constantly changes, on this type of loan.
I think this adquately explains the situation.
How are payments adjusted on an "interest only" mortgage?A reasonable plan.
Check your current ARM and any new mortgage, however, for any prepayment penalty on refinancing or payment of principal. This is not an uncommon feature during the first 3 years of a loan particularly with ARMs.
How are payments adjusted on an "interest only" mortgage?The payment would naturally adjust downward, considering you would be putting more towards the principal. It would become a little less each month to the point that your principle would be paid off, thereby ending your mortgage. I know some great resources for this kind of thing, just shoot me an email to msmith@premierloangroup.com, and well see what we ca do!
Marty
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