What are interest only home loans. ‘Interest
only home loans’ means that the borrower ends up paying only the interest for
some years and then the principle money is added later for years.
This has risen as a better option for many who
are not in position to pay large amounts as EMI’s in present years. Usually for
homes loan in construction phase, you keep paying small money of interest.
In this type of offer the lender gives amount to
the borrower and the purchase deed is completed. The borrower becomes the owner
of the house. Every month he has to pay a small amount that is interest to the
principle loan amount. During later years, as the construction
progresses and the housing complex is ready he has to pay the
interest along with large sums of the principle amount. This option may be
better for individuals home loans who are highly qualified and have a new job
and they know that over the years their salary is going to increase with their
experience. So they can pay smaller amounts in present years and later on be
prepared to pay larger sums to complete the loan repayment.
The interest rates of home loans option
may also be very problem as no one can predict about later years.
The large amounts of money as loans later on can be very difficult to pay back
and one may end up in financial tight spot. Some people also take this type of home
loan if they are confident about the price rise of their property. They can pay
the interest amount and later as the value of their house increases they can
sell this and make profit as well as pay the larger loan amount.
Though a boon to many there are certain risks
every individual has to take before going in for an interest only home loan.
Their job stability may not be guaranteed over the years and only those
individuals who are very confident about their financial growth must go in for
such type of loan. Also the property value may drop or remain same so the
individual may end up paying more than they actually paid for the purchase of
the flat some years back.
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