Question:

Is it possible that with an interest only mortgage bad credit borrowers have a better chance than with other loans?

Answer:

Interest only mortgages require very low payments for some fixed term with which, if made regularly, bad credit borrowers can improve their credit score. At the end of the term the borrower will have the options to refinance the loan, start making larger payments or opt for paying off the balance completely.

Certainly, if you are expecting to improve your financial situation soon, you may wish to make use of the flexibility offered by the interest only loans. Not only do they offer lower monthly payments, but the money saved from paying the principal may be used to bring in additional income to the borrower if managed properly.

However, before choosing an interest only mortgage on account of the opportunity to save from mortgage payment and invest the savings, you should clearly weigh your chances. If you make poor investments, your income may be affected, your mortgage amortization will stay the same, and you will have taken unnecessary financial risks and jeopardized your financial stability.

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