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In Canada, people borrow an interest-only loan to get financial relief in the initial repayment phase. Freelancers, contractors, and business owners having unstable income can get this loan. This allows you to make financial investments and improve your lifestyle. After the interest-only phase, you have to pay both interest and the loan amount. This can put pressure on your monthly budget. Must consider all the risks and benefits associated with this mortgage. Our experts are the mortgage brokers who help you find the best lender, getting the best rates according to your goals and financial challenges.
The Interest-only mortgage is a type of mortgage in which borrowers initially pay only interest for a specific time period. After it, he will pay both the interest and the loan amount. It is helpful for people who know their income will definitely increase after a specific time period. The Interest-only period for this mortgage usually lasts for 20 years or more. People avail this mortgage because it gives them financial relief during the interest-only period. Usually, private lenders offer this kind of mortgage because banks support only loans that are amortized.
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Interest-only mortgages are significantly beneficial for self-employed individuals who now have a plan to increase their income in the future. To get maximum benefits and avoid risks, you have to carefully consider the following tips.
The terms and conditions to qualify for this mortgage are usually higher than traditional mortgages. It requires a high risk for the browser because after the interest-only period, they have to pay both interest and principal amount.
Conditions for this loan are:
High Credit Score: A good credit score can increase your chances of qualifying for this mortgage. It gives trust and confidence to the lender.
Cash Reserves: Your cash reserves show your repayment capacity on time. The higher cash reserves can reduce the chances of missing repayments.
Higher Income: Higher income also helps you to qualify for this mortgage. It shows you can repay the loan with interest.
Affordability: It shows you can repay when with interest-only period ends. This will give you a chance to qualify for this mortgage.
These mortgages have several disadvantages. You have to consider each of them before applying for this mortgage.
Payment Shock: After the interest-only period, you have to pay both interest and the principal amount. This will increase the load on your monthly budget.
Property Depreciation: You cannot build home equity during the interest-only period and ultimately will qualify for a home equity loan. During the principal repayment period, you can claim home equity. But if the value of your home drops, you may owe more loan than the property’s worth at the end.
Higher total costs: The total interest amount is higher in this loan than in other mortgages. You have to pay interest in both the initial and principal repayment phases.
Strict requirements: Due to high risk in such mortgages, lenders have strict requirements for loans, including high cash reserves, good credit scores, and overall high interests.
There are several benefits of this mortgage if handled carefully. Our expert team helps you to find the maximum advantages of this loan.
Potential for investment: Initially, you just have to pay the interest amount. This provides financial relief and space to invest your money in business, buying a home, and fulfilling other dreams.
Low initial payments: Low initial payments help you to stabilize your budget and create financial opportunities to increase your future income.
Tax advantages: The Interest-only phase may reduce your Taxes. This gives you financial relief during this time period.
Banks typically do not offer such mortgages. During its initial repayment phase, you just pay the interest amount, not the principal payment. This is against the bank’s policies. So, you can get this loan from private lenders.
Always consider repayment methods, interest rate, and conditions before borrowing this loan. As a Mortgage broker, we help you get the best lenders according to your financial conditions.
Yes, it’s a good idea to get this loan. It gives you financial relief initially, so you can use your finances on business investments and other purposes.
It means you just have to pay the interest amount, not the principal loan, during the specific interest-only period.
You can qualify for such mortgages by considering a good credit score, savings, and other related requirements.
After the initial interest payment phase, you have to pay both interest and the loan amount. This puts pressure on your monthly budget.
