Picking the parts of the package

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*How do I make Interest Only work for me?

How do I make Interest Only work for me?

In an Interest Only "I/O" loan, the borrower pays no principal until a reset point, which can be anywhere from 5 to 20 years in the future. I/Os are great if you want a larger loan amount or a bigger, better house because they lower the required initial payment. However, unless you make payments in addition to the interest only payment, you will owe the amount you initially borrowed at the end of the interest only period. Your monthly payment will increase once you begin making payments of both principal and interest even if the interest rate does not change. Your interest rate could increase even more if your loan is an adjustable rate loan or home equity line of credit. Additionally, equity is only realized during the I/O period if your home appreciates in value or if you pay more than the required I/O payment.