Refinance:

Interest only mortgages can be an excellent tool for refinancing your mortgage when used correctly. Homeowners who abuse interest only mortgages frequently experience payment shock when the lenders begin adjusting their loans. Here are several tips to help you decide if interest only mortgage refinancing is right for you.

Interest only mortgages come with payments that are based only on the interest due during a given month. The interest only period lasts for a specified period of time found in your loan contract, often five years. At the end of the interest only period, your lender will convert your loan to a standard Adjustable Rate Mortgage amortized for the time remaining on your loan contract.

What does this mean in plain English? During the interest only period you will enjoy much lower payments; however, at the end of the interest only period your payment will go up significantly. This adjustment causes payment shock for homeowners who do not fully understand their interest only mortgages. Because the mortgage is fully amortized for the remaining term length, often 25 years, your payment will be significantly higher than a traditional 30 year loan.

Is an interest only mortgage right for you situation? Homeowners who leverage interest only mortgages properly can save thousands of dollars when refinancing. Interest only these loans are especially useful for real estate investors and homeowners who need a short term mortgage fix. Interest only mortgage loans come with built-in safety features called caps. When structured properly caps limit your risks when refinancing with any type of Adjustable Rate Mortgage. You can learn more about your mortgage options, including expensive mistakes to avoid with a free mortgage tutorial.