INTEREST ONLY LOANS AVAILABLE!
Extremely Low Monthly Payments
Interested in a lower monthly payment? If so, you might want to consider an Interest Only loan. The Interest-Only Loan gives you greater control over what’s most likely your largest monthly expense to help you better manage your cash flow. For the first 10 years, each month you have the option of only paying the interest due on your loan. By taking advantage of the interest-only option each month, you can use the principal portion of your mortgage payment for other purposes, such as investing or paying off higher-cost credit obligations.
Interest-only payments can also assist you in moving into your dream home sooner. You may be able to trade up to the larger home you need, without increasing the amount of money you allocate towards your monthly mortgage payment.
Two Payment Options Each Month
Our Interest-Only Loan gives you the option each month for the first 10 years of the loan to make one of the following payments:
Interest-Only Payment - Defer paying principal on your loan and improve your monthly cash flow.
The money you normally use for the principal portion of your mortgage payment can be used for other
needs, such as paying off high cost credit or diversifying your investments. (After the initial 10 years,
your loan will be amortized for the remaining 20 years and your required payment will be principal and interest).
Principal and Interest - If you prefer to reduce your loan balance each month, you can make a principal and interest payment. Any additional principal paid towards your loan balance will be reflected in your next monthly payment.
Interest-Only Payment Strategies
Strategy 1: Reduce your monthly mortgage payment.
Take advantage of the interest-only payment option to reduce your mortgage expense and increase your monthly cash flow. The money freed up each month can then be allocated towards paying off high cost credit obligations, used to invest, or to take a much deserved vacation.
The chart below shows the payment savings that could be realized each month when you choose to make the interest-only payment versus the fully amortizing payment on a $400,000 loan amount at an interest rate of 3.50%.
30-Year Interest-
Amortizing Payment
|
Interest- Only Payment |
Monthly Savings |
Annual Savings |
$1,796 |
$1,167 |
$629 |
$7,548 |
Savings over 1st 3 years: $22,644
Once the 10-year interest-only period ends, the loan will amortize for the remaining 20 years. Rates are as of 10/24/03 and subject to change without notice. |
Strategy 2: Buy more house for the same monthly payment.
Have a larger home without increasing the money you allocate to your mortgage payment. Let's assume that you would like to initially allocate $1,700 a month towards your mortgage payment (excluding the cost of taxes and insurance).
The chart below shows loan amounts and corresponding purchase prices that would be available based on a 30-year amortizing payment versus an interest-only payment at the same interest rate of 3.50% and a down payment of 20%.
|
Interest Rate |
Monthly Payment |
Loan Amount |
Purchase Price |
Amortizing Payment |
3.50% |
$1,700 |
$378,581 |
$473,226 |
Interest-Only Payment |
3.50% |
$1,700 |
$582,857 |
$728,571 |
Once the 10-year interest-only period ends, the loan will amortize for the remaining 20 years. The corresponding purchase prices are based on a 20% down payment. Rates are as of 10/24/03 and subject to change without notice. |
Why Should You Consider An Interest-Only Loan?
• Mortgage payment flexibility to better manage your monthly cash flow without deferring interest.
• Purchase a larger house without increasing your monthly mortgage expense.
• A guaranteed interest-only payment produces monthly cash flow savings to invest or reduce higher
cost credit obligations.
• More flexibility in managing mortgage interest payment to maximize your tax advantages.
• Make an additional principal payment and see it reflected in your next monthly payment.
Equity Still Builds
It is also important to remember that your house will most likely still be appreciating in value regardless of how little or how much principal you pay on your loan each month. Plus, if you choose to invest the money you normally would pay towards principal each month, this investment may grow to the point where you can pay off considerably more of your loan principal in the future.
Fixed rates are also available for 3-year or 5-year periods!
Ask your mortgage expert at American Residential Mortgage if the Interest-Only Loan is right for you.
