If you are looking to become a home owner, the best option for you would be to take a mortgage. However, mortgages can be quite hectic to service especially if you are not in a stable employment. Due to this, lenders are always coming up with different ways to make it is easier for you to repay the mortgage.
One of these plans is the interest only home loan. As the name suggests, it is a home loan that allows you to pay the interest only for a few years without servicing the principal. Your monthly instalments will only be comprised of the interest under this plan.
This is a very good home loan especially when you are not in a stable financial position. Some of the benefits of the interest only home loan include:
It allows you to make smaller monthly instalments compared to standard home loans. Since you will only be servicing the interest, your monthly instalments will be much lower. This can come in handy during hard economic times.
It helps free up cash flows which you can dedicate to other sectors of your life. In most cases, home loan repayment takes up the biggest chunk of your monthly wage. If you take an interest only home loan you will be able to free up some cash for a few years which can be used to do other investments.
One of the best characteristics of this type of loan is that it gives you flexible repayment schedule. With this loan you have a greater say on how you would wish to pay back the loan and so you can be able to plan your finances much better.
It is very beneficial to those seeking to invest in homes as a business either with the intention to resale or rent out. It will give you enough time to work on the house and bring it to a selling or rental condition. During this period of time you will only be required to pay the interest and once the house is complete, the proceeds from the sale will be able to pay back the principal amount. However, if this is your intention when taking the loan you should remember that you will have to pay tax on any financial gains you make.
Interests only home loans will enable you buy a more expensive home that would ordinarily be beyond your reach. This is because the interest only monthly payments will be more affordable than paying the interest plus principal.
It will give you additional time to plan your finances before you are required to repay the principal which is usually the mammoth part of the loan. The period that you pay interest only can act as a grace period for you, which will allow you to venture into other businesses to help you repay the principal. This essentially means that with this type of loan you may never get to feel its burden on you.
The first step you should take once you secure a loan is to seek the services of a home loan EMI calculator India in order to be sure of the instalments you will be required to pay each month.