The Finance Blogger

We received a question about interest only mortgages from a reader and will answer his questions in our next post about interest only mortgages.

Question to Debt Counselor::Interest Only Mortgage Loan

I am considering an interest only mortgage for my home. We are renewing our mortgage and have this option to consider. It is appealing since the payments will be less than they currently are. We can use all of the cash flow that we can at the moment, since our bills for every day living expenses have gone up so much. The other thing we like is that we can pay down or draw on the interest free mortgage at any time up to an established limit that is based on the equity in our home and the approved limits by the bank.

Do you currently have a mortgage? :: yes

Home/Mortgage Loan Amount :: $75,000, but we would like to increase it to $100.000

Other Loans, Including Credit Cards:: No credit card balances and our car is fully paid for

Are you employed and for how long:: yes for the past 6 years at the same company

Your credit rating to be – excellent, fair, or bad? :: excellent as far as we are aware

Gross Amount Per Paycheck ::$2500

Do you agree to have this information published online, without your PRIVATE information of course? :: sure, as long as all personal identification information is not released on your web site.

Extra information here please (some detail)::

It is time to renew our mortgage. We are thinking about an interest only mortgage while at the same time increasing the amount of the mortgage. We do not need the extra money just now. But we are planning some renovations to our home next year. We thought that this would be a good way to finance the upgrades. We are pretty good with our money and do not have a lot of debt. Our savings are limited, so any renovations that we do will have to be financed. We do not want to leave an unpaid balance on our credit cards since this is so expensive. Credit card rates are around 18 or 19% which is very expensive.

If we cannot get approved for this interest only mortgage loan, we probably will not proceed with the renovations at this time until we can save enough money. We are also concerned about all of the talk in the news about interest rates going up further. They have already begun to increase and are expected to pick up even more if the economy picks up. If we have an interest only mortgage does this mean that our mortgage interest will increase every time the interest rates rise?

Please advise whether that this is a good way to go or not and what the drawbacks would be with this type of mortgage.

If you have a question about debt, loans , mortgages or other financial situations, please feel free to leave a comment with as much detail about your situation as you can. We will try to answer your question in our next post.

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