What is the difference between a "repayment" and "inerest only" when applying for a morgage? ?

Question

What is the difference between a "repayment" and "inerest only" when applying for a morgage? ?

Answer 1

ARRRGH.

Have you not being paying attention the last two years?

Interest only means that on a loan you are making interest payments only.  This implies several things.  Either the value of the house goes up fairly, interest rates do not spiike upwards, or your income rises faster than the rate of inflation.  Can you guarantee any of these things?   I am told approximately 40 per cent of the houses on the market are the result of foreclosures.  

A repayment mortgage means your payments are reducing the balance you owe.

If you cannot afford to make reasonable payments on a house, you should not be in the housing market.  I know renting is a drag.  Losing a house is ten times worse.

Answer 2

I'm not sure I understand the question, but here goes.

Interest only loans:  The first part of the loan term you pay only the interest.  Let's say you borrowed $200,000 at a rate of 5%.  Your monthly payment would be $833, but that only covers the interest on the loan.  The principal balance is not being reduced, so after that portion of the term is over, you still owe the entire amount you borrowed.  The first part of the term can be 1 year or 5 years or 10 years, depending on what was offered by the lender and the choices you made.  You could be making payments for 10 years, and still owe the entire $200,000.

This loan is meant for a specific borrower.  It's for a young intern who is making $xx,x*x in salary today but will be making a boatload of money in 5 years.  He buys the next step up house to get the kids started in the preferred school district now, and he knows when the interest only term ends he'll still be able to afford the house.  It's for the corporate type who'll be transferred every 5 years, and won't build up any equity anyway.  He pays the interest only, as though it was rent on his home.  It all works out the same for him, and he lives in a nice house instead of a rental apartment.  For you and me, regular Joes that we are, this is the wrong loan.

As for repayment, it means paying back.  I guess I don't know the context in which you're using the term.

Answer 3

Repayment means the mortgage is paid off in say 20 to 30 years.

http://en.wikipedia.org/wiki/Repayment_m...

Interest only is a lower payment, but the loan is never paid off. ( a very bad thing )

Answer 4

Interest only is that you pay interest only on the loan and the principal never goes down. This is a great loan program in a great market, but a terrible loan in a poor market when home prices are declining.

Just grab a 30 year fixed and pay a fixed interest rate. Rates are still great, if you need more info just give me a shout, [e-mail]