Interest Only Mortgages in New Jersey

If you’re looking for a mortgage option that provides lower initial payments, an Interest Only Mortgage could be the ideal solution for you. At Cornerstone Mortgage, we offer flexible mortgage solutions that allow you to pay only the interest on your loan for a specific period of time before transitioning to fully amortized payments. This can be especially beneficial for buyers seeking to manage cash flow in the early years of homeownership.



What Is an Interest Only Mortgage?

An Interest Only Mortgage is a loan in which you pay only the interest on the mortgage for a set period, usually between 5 and 10 years. During this time, your monthly payments do not reduce the loan’s principal, meaning you won’t build equity through your mortgage payments. Once the interest-only period ends, the loan becomes fully amortized, and your payments will increase to include both the principal and interest. 

Interest Only Mortgages can be structured as fixed-rate or adjustable-rate loans, giving you flexibility in choosing the right mortgage for your financial goals.


Why Choose an Interest Only Mortgage with Cornerstone Mortgage?

Lower Initial Payments

Interest Only Mortgages allow you to make lower monthly payments during the initial interest-only period, making it easier to manage your finances or afford a more expensive home.

Cash Flow Flexibility

This type of mortgage can be particularly useful for borrowers with fluctuating income, such as business owners or commission-based professionals, as it allows you to take advantage of lower payments during lean periods.

Potential for Investment

By saving on the principal payments during the interest-only term, you may be able to invest the difference elsewhere, potentially growing your wealth while still benefiting from homeownership.

Expert Guidance

At Cornerstone Mortgage, our knowledgeable team will help you understand the benefits and risks of interest-only mortgages, ensuring you make an informed decision that aligns with your financial situation.

Key Features of Interest Only Mortgages

Lower Monthly Payments

During the interest-only period, your monthly mortgage payments will be significantly lower compared to a fully amortizing mortgage.

Flexibility

Many interest-only mortgages offer the option to make additional payments toward the principal during the interest-only period, allowing you to reduce the loan balance when your income permits.

Amortization Period

After the interest-only period ends, your loan will convert to a fully amortizing mortgage, meaning you’ll begin making payments that include both principal and interest. These payments will be higher than if you had started with a fully amortizing loan.

Loan Terms

Interest-only periods typically range from 5 to 10 years, followed by a 20- to 25-year period of fully amortizing payments. Interest Only Mortgages can be structured as either fixed-rate or adjustable-rate mortgages (ARM).

Example of an Interest Only Mortgage

For instance, if you borrow $250,000 at 6% interest with a 30-year mortgage and a 5-year interest-only period, your initial monthly payment would be $1,250 during the first five years. This is lower than the $1,499 monthly payment on a fully amortized mortgage at the same rate. However, after the interest-only period ends, your payments will increase to $1,611, as you begin to pay both the principal and interest. This option provides short-term savings but comes with higher future payments once the principal is included.

Am I Eligible for an Interest Only Mortgage?

Interest Only Mortgages are a good option for borrowers with fluctuating income, such as business owners, freelancers, or commission-based workers, who need flexibility in their mortgage payments. Eligibility depends on factors such as your credit score, income, and debt-to-income ratio.

We’ll Find the Best Interest Only Mortgage Option for you!

At Cornerstone Mortgage, we will work with you to assess your financial situation and determine if an Interest Only Mortgage is the right fit for your home financing needs.

Get Started with Cornerstone Mortgage Today

Are you ready to explore the flexibility and lower payments of an Interest Only Mortgage? At Cornerstone Mortgage, we are committed to helping homebuyers in New Jersey find mortgage solutions that suit their unique financial goals. We serve clients across Warren, Bernardsville, Madison, Mendham, Morristown, Basking Ridge, Bernards, Chester, Peapack-Gladstone, Bedminster, and surrounding areas. 

Contact us today to learn more about Interest Only Mortgages and take the first step toward securing your dream home.

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Frequently Asked Questions About  Interest Only Mortgages

1. What is an interest only mortgage?

An interest only mortgage is a loan where you only pay the interest for a set period, typically between 5 and 10 years. After that period, the loan becomes fully amortized, and you begin making payments on both the principal and the interest.

2. What are the benefits of an interest only mortgage?

The primary benefit is lower monthly payments during the interest-only period, which can free up cash flow for other investments or expenses. This option can be particularly useful for borrowers with fluctuating income.

3. What happens after the interest-only period ends?

Once the interest-only period ends, your monthly payments will increase to cover both the principal and interest. The new payments will be higher than if the loan had been fully amortizing from the start.

4. Can I pay down the principal during the interest-only period?

Yes, many interest-only mortgages allow you to make additional payments toward the principal during the interest-only period, giving you flexibility to reduce your loan balance when your finances allow.

5. Who is a good candidate for an interest only mortgage?

Interest only mortgages are ideal for borrowers with fluctuating income or those who plan to sell or refinance before the interest-only period ends. This option is also useful for those looking to minimize their payments in the short term while managing their cash flow.

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