Homeowners who decided on an interest-only mortgage no doubt are aware of the risks involved once the interest-only period expires. One common issue interest-only borrowers suffer from is mortgage rate whiplash. The sudden increase in your mortgage rate can be difficult to accommodate in your day-to-day lifestyle. Unfortunately, simply renewing the interest-only period is usually not an option. However, there are three good ways to maintain Kansas City mortgage rates for an interest-only home loan:
- Refinance your home loan before the interest-only period expires
- Pay the mortgage principal whenever you can
- Invest the extra cash you save during the interest-only period
Refinancing Your Home Loan
Like other home loans, interest-only mortgages can be refinanced to attain lower Kansas City mortgage rates. However, be sure to check whether there is a penalty for refinancing. Usually if your refinance in three years or less, there will be no penalty.
Many refinancing options allow you to switch to a fixed-rate mortgage. This option is much more comfortable than the typical interest-only ARM, whose Kansas City mortgage rates are eventually determined by the state of the housing market. If asked why you are interested in refinancing, specify to your prospects that you plan to pay off your interest-only loan with the proceeds.
Paying Your Principal When You Can
In many interest-only loans, you can pay part of the principal during the interest-only period without a penalty. Take this opportunity when you can because decreasing the principal will improve your Kansas City mortgage rate once your fixed or adjustable rate kicks in.
Investing Rather Than Spending Extra Cash
If there is a penalty for paying your principal during the interest-only mortgage rate, you may consider investing the extra cash you would normally put towards the principal. Counterbalancing your home loan can be tricky since your return on investment has to be larger than your loan’s after-tax mortgage rate.