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30 Year Interest Only Loan

The world of home loans and mortgages is confusing, detailed and a perplexing place for even a veteran mortgage consumer. Doing a little research and gaining some insight to mortgage lingo and loan terms can greatly increase your understanding of the options available to you.

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A 30 year interest-only loan is one that gives you the option of paying just the interest or the interest and as much principal  as you want during an initial period of a  30 year mortgage. 30 year interest only loans can be fixed-rate mortgages or adjustable-rate mortgages. You can find 30 year interest only loans that are interest-only for the first three, five, seven or ten years.

As with any loan, you will have to weigh the advantages and disadvantages. If you choose to make the interest-only payments then your monthly payment will be lower than it would be with an interest and principal combined payment. Your interest rate may or may not be lower than with a more traditional mortgage but you will have the option of more flexible payments. Interest-only loans allow you to control your payment amount and your cash flow at any time during the interest only period.

Depending on your current situation, it may just make good sense to choose an interest only 30 year mortgage. Usually with a 30-year fixed-rate mortgage, roughly around 73% of the payment goes toward interest during the first six or so years of the mortgage loan. If your interest rate is low and you’ve borrowed money at a good rate then instead of paying off that low rate loan  you can take the  money you would have each month from making interest-only payments and invest it in something that would bring you a higher rate of return and make money.  Alternately, you could also pay on higher interest debt like credit cards. Potentially, depending on the loan amount, you could have access to a whole lot of money over the course of several years to invest or reduce high interest debt. That could be a pretty smart financial move if executed correctly. It’s also a good idea to look at a interest only 30 year loan if you plan on staying in your home for 10 years or less.

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