How to Switch to an Interest-Only Mortgage

Save money by refinancing to an interest-only loan.

An interest-only mortgage loan can reduce your monthly cash outlay. Homeowners realize a lower monthly mortgage payment when using an interest-only loan because their entire payment is applied to interest and escrow items (taxes and insurance). Generally, a standard mortgage loan includes principal and interest payments, as well as escrow items. A homeowner that pays interest only may still owe the original loan amount at the end of his loan term. According to the Bank Rate website, “Financial advisers don't recommend interest-only mortgages to regular wage earners who take out moderate-size home loans without a strategy for investing the savings.”

Instructions

1. Secure an updated copy of your credit report. You will need a current credit report that displays a favorable credit rating to obtain an interest-only mortgage loan.

2. Get information about interest-only product offerings from your current lender. Use a recent mortgage statement to locate the name of your lender’s website. Visit the website to browse information that pertains to interest-only loans.

3. Apply online or call your current mortgage lender. Submit an application online to refinance with an interest only mortgage loan. Call your lender’s customer service department to discuss questions that you have about interest-only loans.

4. Shop online for interest-only mortgage loans. Visit websites such as Lending Tree and Quicken Loans to compare interest-only loan programs. Apply for programs that offer the lowest interest-only rates and fees.

5. Forward all documents as requested by your loan officer in a timely manner. You will save a considerable amount of time and your interest-only loan can be processed quicker. Verifications for employment, assets and wages are completed faster for homeowners that submit documents on time.

6. Meet with a closing agent to sign your interest-only loan documents. Review your new mortgage terms and verify that the interest-only rate and fees shown are reflective of your Good Faith Estimate. Sign and date all required documents to complete your closing package.

References

• Bank Rate: Who Should Get An Interest Only Mortgage.

Resources

• Lending Tree: Refinance Mortgage Loans
• Quicken Loans: Refinancing
• Microsoft: Could You Handle An Interest Only Loan?
• Mortgage Loan: Compare Interest Only Mortgage Calculator