A mortgage is "interest only"
if the monthly payment of mortgage programmed - the payment
the borrower is required to make -- is only composed of the
interest. The option to pay the interest lasts only for one
period indicated, usually 5 to 10 years. The borrowers have
the right to pay more than interest if they want with.
If the borrower exerts the option of interest-only each month
for the period of interest-only, the payment will not include
any refunding of the main thing. The result is that the balance
of loan will remain without change.
For example, if a loan 30-year from $100.000 to 6,25% is
interest only, the payment required is $520,83. On the other
hand, the borrowers who have the same mortgage but without
option of E/S, should pay $615,72. It is "to entirely deaden
the payment" - the payment which would pay with far the loan
above the limit if the rate remained the same thing. The difference
in the payment of $94,88 is "principal", which will reduce
balance. |