Interest Only Mortgages and the Young Professional

Here is one of the successful candidates for the interestonly mortgage. The young professional that is eager to get out into the homeownership market. He or she is equippedwith some level of mortgage product comprehension, and a guarantee ofincreasing income.

Today’s mortgage market has seen atremendous growth in mortgage packages, variety and borrowing levels. The interest only mortgage option, oncethought to have gone the way of the Edsel automobile, is back today and in useby the masses; in fact the mortgage market has seen an increase inthe interest only mortgages from just a mere sliver of the market a few yearsago, to around 23% of the market share currently. That’s huge growth, especially in themortgage industry in less than 5 years. 

Who will benefit most from thistype of mortgage loan product? What type of consumer is it that would want aninterest only mortgage? Well, you willget several answers, but only one or two will be correct. The really smart and savvy borrower, withclearly established goals and objectives that include the interest only option,the young couple that are moving up the corporate ladder and won’t be in thearea over three years, and then there’s the most often sited consumer: This consumer is buying a home with a fairlylimited budget and wants as much home as they can possibly buy. They generally fit into the category of thecouple with children, who need room and who plan to be homeowners at thatlocation for a while. The otherparticularly successful candidate for these types of loans are the young realestate investors, who are profit creators, and won’t retain the property longenough to warrant making a large capital investment.

As you examine the young professional, his or her situation is conducive to minimalinvestment requirement. He or she won’tbe in this job position or this home over 5 years, and the most likely, the companyis willing to include a buy back clause in the employment contract; how can youlose? All the right elements are inplace for this to be a great marriage of needs and wants being satisfied withone package. In cases such as this, theinterest only mortgage option is a great route to take.

What about the young couple with the growing family? Are they the right candidates for such a purchase? Most often, the answer would be yes. They’re budgets are limited, for the present,and their family is outgrowing the present home. Especially if one of thespouses holds a professional degree, they should have no trouble growing into alarger mortgage payment within a few years. The interest only option gives individuals 3 to 5 years to achieve anincome increase, then the principal and interest payment level kicks in, buttheir income will then support a higher payment.

The realestate investors, commercial developers, land brokers, and any other investorthat operates within this realm of business, is a potentially successfulcandidate for the interest only option. This person, or business group, doesn’tintend to retain the property long enough for there to be a need for capitalinvestment. They need the capital freeto make the changes, required planned construction, or to advertise theproperty for sale.

These are the potentially successfully and beneficial relationships that exist with theinterest only option. Are these the onlyindividuals who secure interest only mortgages? Definitely not. Regardless of thepros or cons to the interest only mortgage, and regardless of the originalintent, many of the consumers securing these interest only mortgages are doingso in order to lower monthly payments, to buy more house for less money, andeven to divert income to tax-deferred savings. Some will be successful some will simply wind up paying on their homefor most of their life.