Mobile homes are a choice of many a home buyer due to their efficacy as well as cost efficiency.
There are many loans available in the market presently for financing the buyer's varying and specific requirements.
An interest-only mortgage or loan is one that allows borrowers to pay only the interest for a particular set period of time.
The required monthly mortgage payment does not include the repayment of principal, though loan takers are at liberty to do so if they like.
A new trend has emerged lately regarding the popularity of interest-only loans for the purchase of mobile homes.
It has been observed that lately the interest-only option has been attached to the adjustable rate mortgages.
This explains the rapid growth in the popularity and application of interest-only loans.
Adjustable rate mortgages are risky as homeowners are exposed to rising mortgage rates when market rates increase.
By adding an interest-only feature, the risk is further increased.
When the adjustable rate mortgage rate is adjusted sometime in the future, the new payment due is also calculated using the original loan amount, in contrast to the smaller balance on a fully adjustable rate mortgages.
Interest only loans are offered as a new type of mortgage, with lower rates than standard fixed-rate mortgages.
This is a well tried and successful marketing gimmick since the lowered rates are due to the adjustable rate mortgages and not the interest only loans.
In fact, since there is a higher default risk in case of interest only loans, the price of the mortgage in question with that clause increases.
Interest-only loans are only worthwhile in a few, special cases.
If the borrower keeps repaying the principal as and when he has the money even though he is not obligated to, then the principal amount will also reduce and with interest.