Is it possible that with interest only mortgage amortization is much faster compared to FRMs and ARMs?
Answer:Interest only mortgage amortization is made to appear more desirable by experienced brokers by making it seem something different than a payment option of an ARM which in fact it is.
Amortization can indeed be more rapid with an interest-only mortgage if the borrower is concerned with the level of amortization achieved with the same amount of payment made towards an FRM and an Interest-Only loan.
Consider the following example: if your monthly payment for a fixed-rate mortgage is $500, of which only $100 is used against the principal, and the payment for the interest only mortgage is $250 then you still can pay $500 monthly but $250 of it will be used for the principal, which seems to lead to faster amortization.
However, since the interest only loan is a masked ARM, you may benefit more if you simply make use of an ARM's lower fixed rates and make larger payments than required in order to settle more of your principal and when the fixed period expires, interest rates will be recalculated over a smaller principal.
Final piece of advice: Monitor your credit report and score regularly, to ensure there are no inaccuracies or unauthorized activity. Your credit report and score are the two major methods that creditors and lenders use to make a credit decision about you. Higher scores usually mean lower interest rates, which will save you money.
See All 3 National Credit Scores & 3 Reports Instantly, Online & Free!
| Not at all | Definitely |
Mortgage QnA is not a common forum. We have special rules:
- Post no questions here. To ask a question, click the Ask a Question link
- We will not publish answers that include any form of advertising
- Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
Common misspellings: mortage and morgage