2006-07-08 12:31:38 · 8 answers · asked by Joel J 1 in Business & Finance ➔ Renting & Real Estate
If their loan is an adjustable loan, then their rate is going to rise at the next allowable date, and their payment will go up.
Note that not all adjustable loans follow the same index and a rise in the prime rate doesn't always cause a rise in a particular morgage.
2006-07-08 12:35:49 · answer #1 · answered by Lori A 6 · 0⤊ 0⤋
Interest Only Loans are tied to an index, such as LIBOR,COFI,MTA etc. If Fed. Reserve raises fed funds rates, your lender will send you a notice that your payment is going up. So nowdays you might be paying more each month than for a fixed rate loans. That is why many people are looking to refinance and get fixed rates to protect them from another rate hike, which might come again.
2006-07-08 15:08:10 · answer #2 · answered by ratetake 3 · 0⤊ 0⤋
Because it costs banks more money to borrow from the Feds so when the feds raise interest rates, the banks have to raise them for you to make money. if you already have a loan that's locked in, you're fine until it expires. The biggest problem people are going to run into on interest only loans is when the loans expire, the payments will go up significantly leaving many people unable to make the adjusted payments.
2006-07-08 12:38:41 · answer #3 · answered by Dr. Phil-lys 4 · 0⤊ 0⤋
A hike in interest will cause a bigger payment for the loan. As the payment (monthly or biweekly or whatever time span) getting bigger, the person might get into trouble if does not have much money to pay.
2006-07-08 12:37:40 · answer #4 · answered by teddybear1268 3 · 0⤊ 0⤋
Interest only is a bad loan, unless you plan to sell right away.
Your mortgage payments can double.
It will be hard to refinance, because the house is now worth less than the loan you got.
2006-07-08 14:31:17 · answer #5 · answered by Anonymous · 0⤊ 0⤋
it depends...
there are mortgages that offer fixed interest rates, that means your interest is not to be affected by the prevailing market interest rates
however,
if the home loans availed are of flexible interest rates, definitely, it will affect the amortization due from you as interests thereon will be adjusted accordingly...
2006-07-08 12:38:45 · answer #6 · answered by sheikaella 4 · 0⤊ 0⤋
If your interest only payment is a fixed rate for a number of years - than you are ok. Check your Mortgage Note, Truth-in-Lending , that you got at your closing...
2006-07-09 14:55:01 · answer #7 · answered by W. E 5 · 0⤊ 0⤋
you can and will pay more only if you dont have a fixed rate.
2006-07-08 12:35:16 · answer #8 · answered by ? 3 · 0⤊ 0⤋