Interest only mortgage loans provide the home owner the most flexibility in payments possible. With interest only loans for home mortgages, you can pay only interest, or you can pay interest and principal (please check with your lender or perspective lender to ensure there are no prepayment penalties), depending on your finances each month. Not only do these loans provide flexibility, but allow income growth for young families while paying only interest for a period of time.

Everyone knows that mortgage loans accrue interest and that a large portion of the payments the first years of a mortgage are only interest. As the principal begins to become a larger portion of the payment, then the loan balance reduces quickly. So why would someone want to consider any type of loans based on interest only for their mortgage?

If you know your income will grow over a period of time, then you might be a candidate for interest only loans for the first years of your mortgage. An example would be a lawyer or any type of professional who begins at only a starting income, but will experience huge increases in profits or income over a short number of years. The interest only mortgage option for these people’s home mortgage loans would allow them to put off the payments toward principal until their income grows.

Anyone who knows they will have access to capital soon – whether it be from a relative, or from the maturity of some investments -- but not soon enough to pay for purchasing their home should consider an interest only mortgage for their home loans. Once the investments mature, then large principal payments can be made and the home could even be refinanced into a more conventional loan. This is the kind of flexibility provided by these loans. The payments are not as structured as loans where a set payment amount of interest AND principal is due each month, rather, you only have to make interest payments each month.

The only problem with interest only mortgage loans is the temptation to pay interest only continually, even though you may have money to pay toward principal. This will gain you absolutely no advantage over renting since your entire payment will go to the bank and nothing toward home equity.

The key to interest only mortgage loans is discipline. Even if you pay only a few dollars each month toward the mortgage principal on the loan, it makes a big difference over time. Windfall monies, such as a big bonus or tax refund, should go straight toward principal to lower your loan balance.

Don’t ever think that an interest only home loan will make payments tiny. It doesn’t work that way. If you look at an amortization chart, you will learn that the first month’s payment on a conventional loan places all except a few dollars toward interest only.

If you are in the class that will have higher incomes over the next few years, don’t discount the flexibility of interest only loans. If you are absolutely sure you can pay the mortgage interest every single month on time with today’s salary, then you can have more house for less money than with a conventional mortgage. You will simply begin paying smaller payments and increase your payments as your income grows.

If you don’t want to have to move at what may be one of the busiest times of your career, having more house now can be a big benefit, especially if both members of a couple are in careers which will experience income growth quickly. Get the home you want now and never have to move again! Loans that allow payment of interest only on your home mortgage loan work very well for the disciplined professional.