Interest Only Refinance



1. Interest only loans mean that the principal payment on a mortgage will never be paid upon.

False
An interest only refinance plan or loan does not mean that the principal will never be paid upon. This payment option is attached to a note, stating a specific amount of time that the payment can be made. It is important to understand the difference in these items in order to maintain good financial records and payment history.


2. Interest only refinance is the best option for anyone considering a mortgage.

False
Interest only loans are not the best option for anyone considering refinancing their mortgage. A good prospect for this situation could be the person or family expecting to be in their home for a period of less than ten years, considering that mortgage payments are largely interest for the first few years of the loan. The option of making the payments could allow for extra cash flow or the chance for the individual or family to save for college tuition, home improvements, vacations, retirement, etc.


3. Interest only loans are not suggested for persons who have a regular wage income.

True
Regular wage earners who have moderate size mortgages and who do not have a strategy for savings, are not recommended for interest only refinance projects.


4. With interest only refinance programs, mortgage payments are locked in at the initial payment.

False
With interest only loans, interest on the mortgage is paid monthly for a fixed term only. At the end of the contract term or period, the borrower begins paying off the principal. In this case the payments could jump. The borrower may choose to make the payments in a lump sum. Another choice will be for the borrower to have the option to refinance. This decision will be based on the current financial situation of the individual or family. Taking the time to research each option can be helpful in making the best choice.


5. When considering the option to refinance, it is best to research and seek the advice of a financial advisor.

True
Proverbs 19:20 - Hear counsel, and receive instruction, that thou mayest be wise in thy latter end.


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