If you choose to make the interest-only payment one month, that month's payment is lower than it would be had you made the principal and interest payment. Your interest rate may or may not be lower than a traditional mortgage, but you will have the option of choosing your payment. Sophisticated homeowners know that having this type of payment flexibility is one of the smartest ways to manage your personal finances.
Refinancing from a traditional home loan to an interest-only loan has become popular because it gives you control over your cash flow. This example illustrates the payment flexibility of refinancing a $150,000 mortgage to an interest-only loan.
- $150K @ 7.5% Interest-Only Payment..........$745.00
- $150K @ 7.5% Principal and Interest Payment....$1,050.00
- Cash flow difference is $305.00 a month.
It's this simple: with an interest-only loan, in months when you need more cash, you don't have to pay principal and interest. You can just pay the interest. You can get a free quote for current interest only rates at Quickerlend