Interest Only Mortgages and Loans

An "Interest Only" Mortgage loan is a very popular alternative to traditional fixed rates. Gaining popularity at record speed these home loans allow a consumer to make "Interest Only Payments" during a defined period of time for the loan. These programs can offer consumers greater purchasing power, increased cash flow and a number of other benefits. For example, one of the most common programs a is a 5 year interest only loan where the borrower has a fixed rate for five years and is only obligated to pay the interest owed every month. This could mean hundreds of dollars in monthly savings, increased purchasing power (since you may qualify on the interest only payment) and more. These loans are not for everybody however if you are self disciplined, have a good understanding of the time frame you will be in your home and understand the potential risks then these products provide an extremely attractive option to many homeowners. Below is a list of some of the most popular loan types:

--------------------------------------------------------------------------------

One Month Libor Loans
The interest rate on this loan is the sum of the LIBOR index plus a margin rounded to the nearest one-eighth of one percentage point, (0.125%). The margin will not change throughout the term of the loan however the index value will be adjusted every month, which will cause your interest rate to be adjusted accordingly.

--------------------------------------------------------------------------------

Six Month Libor Loans
The interest rate on this loan is the sum of the LIBOR index plus a margin rounded to the nearest one-eighth of one percentage point, (0.125%). The margin will not change throughout the term of the loan however the index value will be adjusted every six months, which will cause your interest rate to be adjusted accordingly.

--------------------------------------------------------------------------------

One Year Libor Loans
The interest rate on this loan is the sum of the LIBOR index plus a margin rounded to the nearest one-eighth of one percentage point, (0.125%). The margin will not change throughout the term of the loan however the index value will be adjusted on an annual basis which will cause your interest rate to be adjusted accordingly.

--------------------------------------------------------------------------------

3 Year Interest Only Arm
The interest rate is fixed for the first three (3) years of the loan term and your only obligation are interest only payments. during years 4 thru 30 the interest rate is adjusted every year to the sum of the LIBOR index plus a pre-defined margin rounded to the nearest one-eighth of one percentage point - (0.125%). The margin will not change throughout the term of the loan however after the initial period has passed (month 37) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender.

--------------------------------------------------------------------------------

5 Year Interest Only Arm
The interest rate is fixed for the first five (5) years of the loan term and your only obligation are interest only payments. during years 6 thru 30 the interest rate is adjusted every year to the sum of the LIBOR index plus a pre-defined margin rounded to the nearest one-eighth of one percentage point - (0.125%). The margin will not change throughout the term of the loan however after the initial period has passed (month 61) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender.

--------------------------------------------------------------------------------

7 Year Interest Only Arm
The interest rate is fixed for the first seven (7) years of the loan term and your only obligation are interest only payments. during years 8 thru 30 the interest rate is adjusted every year to the sum of the LIBOR index plus a pre-defined margin rounded to the nearest one-eighth of one percentage point - (0.125%). The margin will not change throughout the term of the loan however after the initial period has passed (month 85) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender.

--------------------------------------------------------------------------------

10 Year Interest Only Arm
The interest rate is fixed for the first ten (10) years of the loan term and your only obligation are interest only payments. during years 11 thru 30 the interest rate is adjusted every year to the sum of the LIBOR index plus a pre-defined margin rounded to the nearest one-eighth of one percentage point - (0.125%). The margin will not change throughout the term of the loan however after the initial period has passed (month 121) the unpaid balance is fully amortized over the remaining term and the borrower is now obligated to make principal and interest payments to the lender.

--------------------------------------------------------------------------------

10/30 Year Interest Only
A fixed rate for 30 years where the first 10 years are interest only payments. After the initial period has passed (121st month) the unpaid balance is fully amortized over the remaining term of the loan however the interest does not change. Most lenders allow the borrower to make voluntary principal payments during the interest only period.

--------------------------------------------------------------------------------

15/30 Year Interest Only
A fixed rate for 30 years where the first 15 years are interest only payments. After the initial period has passed (121st month) the unpaid balance is fully amortized over the remaining term of the loan however the interest does not change. Most lenders allow the borrower to make voluntary principal payments during the interest only period.

--------------------------------------------------------------------------------

It is important to note these are common descriptions of the popular interest only loan programs available however it is imperative you ask your lender for an explanation of any program before applying. The mortgage market is subject to change with little notice at time and products are continually being updated (for better or worse). It is your responsibility to understand the program - If you do not understand then do not sign - the golden rule!