Interest-Only Loan - Who Should Consider It & Why? There are a few advantages and disadvantages attached to every kind of credit/loan. Some of these loans will suit you better than others. It all depends upon your needs and what you are going to do with that amount of credit. A lot of people seem to be talking about a few concepts such as interest-only real estate loans, multi-family property financing, and the like. If you don't know what an interest-only loan is, you are not the only one. Who Should Consider An Interest-Only Loan And What Exactly Is It? An interest-only loan is a kind of mortgage in which the borrower is not required to pay the loan amount or even a portion of the loan/principal early on. They are only asked to pay the interest on it. The principal can be repaid at a later stage either in a lump sum amount or in subsequent payments. Interest-only loans are popular because they make a lot of financial sense for several borrowers. You may choose this kind of credit for the following benefits: • • • •
When you are looking for a significantly lower monthly payment, especially during the introductory period You can lower the interest rate further if you decide to structure it as an adjustable-rate mortgage You can keep your money in cash form for more liquidity instead of locking it up in home equity You will be able to recoup all the cash that you have spent on home purchase and several other related costs faster
At the end of the day, whether you choose an interest-only real estate loan or multifamily financing, it all depends upon your particular needs, ability to repay the loan, and overall financial situation.