Interest Only Mortgages Are Hot!

Interest only mortgages are one of the best selling products today. With an interest only mortgage you may either pay just the monthly interest that is due on your loan or you may pay both the principal and interest. This type of mortgage is good for someone that may own their own business or be in sales because you are not committed to make the full principal and interest payment. If you have a bad month just pay only the interest due. With the interest only mortgage if you make a payment towards your principal your monthly payment will be reamortized to reflect the new interest payment that is now due. This is an excellent mortgage for someone that wants to pay off their mortgage quickly too because of the reamortization feature. With any other type of mortgage if you pay anything towards the principal your monthly payment does not change.

Fannie Mae has recently made it harder for borrowers to qualify for this mortgage. They now make the borrower qualify at the fully amortized monthly payment not the interest only payment. This change has made it much harder for borrowers to qualify.

On Fannie Mae interest rates (which are the best there is) there is a hit to the pricing on interest only mortgages of about .25% to .375%. This means your interest rate will be about .25% higher than if you chose a straight 30 yr fixed.

The interest rate on the Fannie Mae interest only mortgage is fixed for the full 30 yrs so the interest rate will never change. The loan is interest only for 10 to 15 yrs. After this initial period you will have to pay both the principal and the interest. The loan will also at this time be reamortized to 20 yrs if it was a 10 yr interest only and 15 yrs if it was a 15 yr interest only. If you haven't been paying anything towards your principal during that initial period your payment will go up dramatically. At that point it will be like you have a 20 yr or 15 yr mortgage depending upon which interest only term you originally chose.

The interest only mortgage is also good for anyone that thinks that they will be selling their home in the next 10 to 15 yrs.

Sandra Sheely is President of First Financial Mortgage, Inc. in Sunrise, FL. She has been in the Real Estate Industry for 12 years with experience in the mortgage industry and title industry. She has a couple of Mortgage websites. http://www.ffinancialmortgage.com and http://www.lowestraterefi.com She writes a mortgage blog on both of her mortgage websites.