Perhaps your family is growing rapidly, and you need a bigger home than you can currently afford. Maybe you are moving to an expensive location for a new job and don’t want to settle for a small or less desirable home just because the money hasn’t started rolling in just yet. In cases such as these, where you have your sights set on a piece of property that is more expensive than you can afford, it is worth considering an interest only mortgage.
How Interest Only Mortgages Help You Afford a More Expensive House Right Now
If you secure an interest only mortgage in South Perth, you will only be expected to make payments on the interest each month. You will not have to make principal payments, which means your monthly payments will be less expensive. Thus, you will be able to afford bigger, better properties than you could through a traditional mortgage.
In most cases, lenders will assess your debt-to-income ratio when determining how much they will lend you for a mortgage. If your monthly income is not high enough, based on this ratio, to cover the monthly payments required for a certain size mortgage, you will not qualify for that mortgage. The lender will assume that you will not be able to handle the monthly payments and will opt not to take the risk. With interest only loans, the monthly payments are lower, making it possible for you to afford more expensive properties and qualify for bigger mortgages.
At Peter Dunn Finance, we often speak with clients who are interested in interest only mortgages in Armadale, Fremantle or South Perth. These buyers like the idea of being able to afford more expensive properties now. Sometimes, they want to free up cash so they can invest it elsewhere—such as in the stock market or a new business venture. Other times, they believe they will be making considerably more money in a few years—when the interest only period ends and the principal payments set in.
In either case, it’s clear why interest only loans are so attractive. They allow you to defer most of your mortgage expenses until later—maximising your cash liquidity in the here and now and allowing you to shoulder higher rates later when you are better equipped to handle them.
Making an Interest Only Mortgage Work for Your New Perth Home
If you do decide to pursue an interest only mortgage in Fremantle, South Perth, Armadale or anywhere in the Perth metro area, Peter Dunn Finance can help. However, it is important to have a strategy in place for how you will make interest only loans work for you. Said another way, you shouldn’t choose an interest only loan just to lower your monthly costs, with no thoughts spared for the future. Instead, you should make plans to save money for a big lump sum principal payment when the interest-only period ends. Alternatively, you can make payments on the principal at your leisure throughout the interest only period—a popular option for families with irregular income.
At Peter Dunn Finance, we can assist you in planning a strategy for how to handle principal payments on an interest only mortgage. Call us on 0427 947 480 if you are interested in scheduling an appointment.