How does an interest-only mortgage work for young homebuyers and what are the risks?Answer:
Banks and lending companies usually fall short to fully explain how an interest-only mortgage will work for a prospective homebuyer. They either cite only the advantages of interest-only home loans, or outright discourage clients who do not fit the investor or business owner type.
Although there are certainly great advantages of interest-only loans for an experienced investor, there are also certain risks. If you want the interest-only mortgage loan to work right for you and you are not some financial-savvy person you might consider making some down payment to cut the risk of property value depreciation.
Approaching a financial advisor might be worth the fee but bear in mind that not everybody will take your financial circumstances responsibly and will truly advise to what is in your best interest.
Interest-Only mortgages can work for the average consumer.
If you are a first-time homebuyer and/or young, it is likely that you are trying to find a cheaper way to finance a home and you are somewhat early in your career. While there is no guaranty that your loan will be successful, young educated first-time homebuyers usually are a good risk - they either have stable career plans already, or are keen on starting a career.
As long as you discuss your options, finances and plans with a personal financial advisor you can trust and become aware of the inner mechanics, risks and advantages of interest-only mortgage loans, odds are good that your IO loan will be successful.
Risks of Interest-Only Mortgage Loans for First-Time Homebuyers
If you never owned a home, you may not be aware of all responsibilities that accompany this fact. For example, you won't be paying principal and interest only, but taxes and insurance, too. Also, if you miss several payments your mortgage company may initiate foreclosure on your home and you risk losing it if you can't afford the monthly payments.
Basically, if you really want an IO loan you'd better know why and stick to your career/financial plans to make things work.
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