This loan is handy because it offers you predictable monthly bills for the initial portion of your loan, but allows you to take advantage of interest rate fluctuations in the latter half of your term.
What can I use a 3 Year Interest Only Loan for, and what are my options
With the 3 Year Interest Only Loan, the first three years of your mortgage loan are fixed rates, and you will only pay the interest portion of your loan. For the second part of your mortgage, your rate will change yearly, and according to the LIBOR index, plus a margin. The margin will not change throughout the mortgage. The loan will be fully amortized over the remainder of the term, and you will be required to make payments on the principal as well as interest.
One disadvantage to the 3 Year Interest Only Loan is that you will not start to build equity until you begin making payments on your principal, which in most cases is three years with this loan. Many lenders let their borrowers make voluntary payments on their principal in conjunction with their interest payments during their interest only period. This helps you build equity. It also lowers your interest payments because the lenders adjust your mortgage payments to reflect your new principal balance. If you have a large income tax return, or get a bonus at work, it would be wise to invest it on your principal.
How can my Credit Score/ FICO affect my mortgage rate
Credit Scores are always important in determining mortgage rates. If you’re worried that you have bad credit, see if you fit the profile:
You are eighteen and have no credit history.
You have been reported to a collection agency within the last ten years.
You have bankruptcies, liens, or judgments against credit with in the last seven to ten years.
This site is not a broker and does not collect or solicit mortgage applications. Content is for informational or comparison purposes only. Services are not available in New York. Products and services may not be available in all other states.
