30 and 40-Year Fixed Rate Interest-Only Home Loans
If you're looking for a lower monthly mortgage payment, Veritas Funding has just the loan program for you! We are excited to offer new 30 and 40-year fixed rate interest-only home loans.
A Fixed Rate Interest-Only loan with Veritas Funding means that you will only pay interest for the first ten years of your loan, then the remainder of your loan will be principal and interest payments (P&I).
For Example, a 30-Year Fixed Rate Interest-Only Home Loan would have you paying only interest of your mortgage payments for the first 10 years while the subsequent 20 would be P&I. Meanwhile the 40-Year Fixed Rate Interest-Only Home Loan is 10 years interest only, then 30 years of P&I.
Your monthly payment for a $300,000 loan with a 6% interest rate (6.28% APR) would cost around $1,500 per month during the first 10 years. However, on the 11th year, that payment jumps to around $2150.00 per month until the end of the loan. That's a 43.3% increase in your monthly mortgage payment.
What are the Advantages?
There are a lot of attractive benefits of interest-only loans that appeal to a variety of borrowers. These include:
Low monthly mortgage payment for the first ten years
You are not required to pay down the principal during the interest-only period
The interest rate is locked for the entirety of the loan
You could refinance the loan before year 11 to avoid the increased payments (if you refinance when rates are lower you could maintain a low payment)
- You are able to take advantage of mortgage interest tax deductions
For loans up to $750,000 you can deduct 100% of your interest-only mortgage payments if you opt to itemize deductions
Industry experts say these loan types are perfect for people who have variable income, especially during times when cash flow is short. Then when times are better they can pay additional payments towards principal.
What are the Disadvantages?
Of course, all unique loan types like this come with disadvantages. It’s important to know what to expect to ensure you’re making the right financial move for yourself or your family. Some of the things to be aware of are:
Your monthly mortgage payment will increase in year 11 when you begin repaying the principal
Since you are not paying down the principal during the interest-only period, your loan size will not decrease
Because your loan size doesn't decrease, should you sell your home during the first ten years the only additional funds you will bring into a future home purchase will be accrued equity
It’s important to note that qualifying for an interest-only loan may be more difficult than conventional loan types and industry experts caution against thinking this type of loan will be your ticket into a more expensive home than you can afford otherwise.
Is a 30 or 40-Year Fixed Rate Interest-Only Home Loan right for me?
If you're interested in learning more about our 30 and 40-year Fixed Rate Interest-Only Home Loans, please fill out the contact form below or use our digital web assistant Lydia to be connected to a loan officer! We would be happy to answer any questions you may have.