Interest Only

Barrett Financial Group, LLC offers Interest Only loans, a unique mortgage option that allows borrowers to make monthly payments covering only the interest portion of the loan for a specific period. During this interest-only term, no principal repayment is required. These loans are available for both fixed-rate and adjustable-rate mortgages, including option ARMs.

The advantage of an Interest Only loan is that it can help you secure the home you desire without compromising on affordability. By paying only the interest during the specified period, your monthly payments are significantly lower than they would be with a fully amortized loan. This can be particularly beneficial when you're looking to purchase a higher-priced home that might have otherwise been out of reach.

It's important to note that once the interest-only period ends, the loan transitions into a fully amortized loan, resulting in significantly higher monthly payments. The longer the interest-only period, the larger the increase in monthly payments when the principal repayment begins.

During the interest-only term, you won't be building equity in your home. However, this option allows you to qualify for the loan based on the interest-only payment, potentially giving you the flexibility to refinance or invest the principal portion of your payment elsewhere. You can enjoy the tax advantages and potential appreciation that come with homeownership while effectively leasing your dream home in the short term.

For example, if you borrow $250,000 at 6 percent using a 30-year fixed-rate mortgage, your initial monthly payment would be $1,499. However, with a 30-year mortgage featuring a 5-year interest-only payment plan, your initial monthly payment would be $1,250, saving you $249 per month or $2,987 a year. But by the sixth year, your monthly payments would increase to $1,611, requiring you to plan for the higher payments or consider refinancing.

It's important to consider that while Interest Only loans may provide short-term savings, they can be costlier over the entire 30-year loan term. However, many borrowers choose to repay their mortgages well before the full term.

Interest Only mortgages can be advantageous for borrowers with irregular incomes, as they offer the flexibility to pay only the interest during lean times and use bonuses or increased income to pay down the principal. This strategy allows borrowers to manage their cash flow effectively.

Barrett Financial Group, LLC is here to assist you in exploring the benefits and considerations of Interest Only loans. Our experienced team can guide you through the process and help you determine if this option aligns with your financial goals and circumstances. Contact us today, and let us assist you in making an informed decision regarding your mortgage financing.