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Interest-Only The Pros and Cons: Home Loans and Home Equity Lines of Credit

By M. Nyce

Interest-only home loans are ones where you pay only interest for the first 5, 10 or even 15 years of the loan, significantly lowering mortgage payments during the first few years. Home equity lines of credit have been increasing in popularity because the mortgage lender only requires the borrower to make an interest only payment that tends to be less than the standard principal and interest payment.

Interest-only mortgage loans:

  • Offer lower mortgage payments during the first few years than conventional mortgages, because initially you're only paying interest.
  • Provide more purchase power to buy a higher-priced home than you could otherwise afford.
  • Can help you avoid foreclosure.
  • Frees up your cash flow for debt consolidation or other investments.
  • Can be a way of investing in a rising real estate market.

On the other hand, interest-only loans:

  • Require you to repay the entire outstanding principal in a shorter period of time, resulting in higher monthly payments.
  • Could cause you to owe more on your home than it's worth if the house declines in value during the interest-only period of your loan.

Interest only loans are not just for purchase loans. Many people refinance with interest-only loans to avoid foreclosure and sometimes for debt consolidation. There are also several varieties of interest-only home equity loans (second mortgages). These work in a similar way as those offered for first mortgages, including lower payments for affordability during the first few years of the loan.

Maria writes loan articles for banking institutions across the country. Get fast home equity rate quotes at Interest Only Second Mortgages. For more loan advice go to Home Equity Lines of Credit and Home Equity Loan Rates.

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Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 4 percent for the week ending November 6th.

For most of 2011, rates on benchmark 30-year mortgages averaged 4.25% percent, second only to last year's 4.125 percent, the lowest annual rate in Freddie Mac's record keeping.

Take out a Home Improvement loan and make those cosmetic changes that you've been talking about. In most cases, making home improvements increases the value of your property. Home Improvement Loans!

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Do you have Less-than-perfect credit? - We specialize in debt consolidation loans even if your credit is in "the rebuilding phase".

Bankruptcy or Foreclosure - Even if you've had a bankruptcy, or foreclosure in the past, we will do our best to get you qualified for a debt consolidation loan.

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