Tips on Interest Only House Loans

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Understanding mortgage graphs and interest only house loans is important when buying a house. See why in this free video on real estate and bank loans.

Part of the Video Series: How to Pick a Mortgage
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Video Transcript

Another mortgage that has become popular is called the interest only loan. These are set up mostly on ARMs. They can be set up for a one year, three year and five year ARM. These are amortized over thirty years but you're only paying down on the interest, you're not paying anything down on principle so say if you borrow a hundred thousand dollars from the bank, you have an interest only loan, at the end of the five year ARM for an interest only loan, you still owe that one hundred thousand dollars. So that has its place for somebody that's strapped, maybe somebody that lost their job, they need to refinance to get a lower interest rate and interest only loans do have lower interest rates for the most part. They do have their niche. Again, interest only loans only pay down on the interest, not on the principle, so at the end of that particular period like we talked about, you will still owe the principle.


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