by WIC
The IO loan has become very popular in recent times. Despite it’s popularity, not everyone is right for an IO loan. In this article, we’ll look at a few factors you can consider when thinking about an IO-loan.
An Interest-only loan is a good choice when you expect your income to rise in the near future. If you’ve got a study to finish, or a promotion to come, you can choose the IO-loan. It gives you low monthly payments now and when the mortgage payments get higher you can afford it because you’ve gone up in income.
Maybe your in a situation where you have ups and downs in your income. If this is the case, an IO-loan gives you the option of paying only interest in the leanest months and paying more when times are good. With an IO-loan, you can pay off principle without a penalty. But be sure to pay off principle when you can, or you will be unpleasantly surprised by the rise in payments when your Interest-only loan ends.
If you are a first-time home buyer, an IO-loan allows you to get more home with your income. The smart way if using this advantage is buying a starter home, waiting until it has risen in value enough to make a profit and then selling it. The mortgage gets paid off and the profit can be used to buy the next, bigger house. The next mortgage can be a ‘regular’ mortgage.
An IO-loan has many advantages, but only if you have the financial discipline that is needed. You have to keep in mind that you should pay off the principle whenever you can. If you decide to spend the money on something else, this will come back to bite you when your Interest-only loan ends.
About the Author:
WIC is an institution that writes about financial matters. They also write articles about
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