| You know, with phrases such as the title above, and | | | | to the equation, it means it's a 1% interest only ARM |
| the myriad of paths the mortgage industry runs us | | | | for 1 month; the interest only loan option at 1% is |
| down, it's no wonder that the average consumer | | | | good for the first month, then the interest only |
| becomes lost in the process. Then, the mortgage | | | | option at a normal interest rate is due for the next |
| market adds this new little product called the interest | | | | five years of the loan, after that point in time, the |
| only loan, and presto, further confusion. Add to this | | | | interest rate may change, and the payments will |
| fact that the interest only loan option can be added | | | | begin to include principal and interest. The only other |
| to almost any mortgage product already in existence, | | | | element to define is the interest only loan option. On |
| and you have total chaos. Well, let's take this puzzle | | | | an interest only loan, only the interest is paid for a |
| apart, one piece at a time. The first piece to examine | | | | specified period of time. Nothing applies to the |
| is the basic loan product: an Adjustable Rate | | | | principal; the only part that the consumer pays of the |
| Mortgage or ARM. An adjustable rate mortgage | | | | mortgage loan is the interest. That is an interest only |
| provides the consumer with a mortgage that allows | | | | loan. Okay, that makes it more easily understood. But |
| the interest rate to be adjusted at mutually agreed | | | | is it a better deal for the consumer today? I am |
| upon times. This means for the consumer, if the | | | | inclined to disagree that an interest only loan option is |
| interest rate goes down, they can get a better rate. | | | | the best option for any consumer, other than just a |
| For the lending institution it means if the interest rate | | | | small handful, and we're not discussing those |
| goes up, they get a better return on their | | | | borrowers in this article. The interest only loan, |
| investment. It's usually a win-win situation. The | | | | whether it's tied to an ARM, or an FRM, is never a |
| consumer generally gets a better interest rate on the | | | | good idea when you want to pay for your home, |
| front end, with the assurance that is the interest | | | | and retire in that same home. This type of consumer |
| rate doesn't just explode; they'll get to keep a great | | | | comprises about 65% of the market today. So, for |
| rate. Now, a 5 year ARM means that the interest | | | | the vast majority, an interest only loan of any kind is |
| rate is locked in for five years. When you add the "1" | | | | not your best bet. |