The Pros and Cons Of A Re-fi With An Interest Only Loan

Is it good personal finance to refinance your investment property mortgage with an interest-only loan. What’s good about the interest-only loan is that you aren’t paying down the principal balance over at least an initial portion of the loan term. That improves the monthly cash flow on the property and keeps the mortgage interest expense constant over time. A common interest-only structure is a 5/1 or 7/1 adjustable rate mortgage, or ARM. Fixed-rate interest-only mortgages are available — the typical interest-only loan is not interest-only for the life of the loan, just over an initial term. At the end of that initial term, the loan payment will be recalculated to include the repayment of principal. Because the principal repayment takes place over fewer years, there can be a big jump in the monthly mortgage payment.