Do You Qualify for an Interest-Only Mortgage Loan?

Interest-only mortgages are an excellent option for people with clear, documented assets, strong credit and a financially sophisticated approach to home ownership. 

This type of home loan is attractive for keeping capital available by lower monthly payments for a set period of time before the principal is due.

Carlyle Financial clients come to us because we navigate complex financial scenarios with specialized needs to find the best possible mortgage for you. The following questions came to us from past clients that include executives at industry-leading retailers and startups.

When you work with Carlyle Financial, you can trust we are connected to the marketplace with deep knowledge of lender rates, requirements and maximums.

Before you move forward with an interest-only mortgage loan, review the most common questions from people who have been in your shoes.

Do you qualify based on the interest payment of an interest-only home loan?

In most cases, you qualify for an interest-only mortgage based on the projected monthly payment when your interest-only period ends. 

For example, if your interest rate is fixed for seven years with a 30 year loan term, you qualify based on the adjusted rate after seven years and one day. This added layer can be difficult to understand even for sophisticated borrowers. 

When you apply for an interest-only loan, expect to provide income documentation based on the principal and interest amount. You should know interest-only mortgages increase your purchase power. You need to meet requirements to a traditional principal and interest loan. Instead, it increases the amount of capital you have by decreasing your monthly payment for the term.

Let’s continue this example. In the example above with a 7 years fixed interest rate and 30 year loan term, your underwriter will look at your ability to pay over a 23 year period. 

As you understand the interest-only option more, you may choose a type of loan that is less aggressive. We can help you navigate which option is best for your short term outlook and long term priorities. 

The reserve requirements are usually higher than principal and interest loans; in each case you can talk to your loan expert.

What documentation do I need for an interest-only mortgage?

With all loans, you often qualify for a better rate when you have increased documentation.

Although you can move forward with alternative documentation and exceptions for complex situations, it can impact your rate.  

Carlyle Financial will help you balance what types of documentation you can provide during the home loan process to get the best terms. 

What are your rates?

Rates are variable and depend on your specific situation including income documentation over three years, which product fits your priorities and your credit score. 

Before you decide to get an interest-only mortgage loan, have a good idea of your income for the last two years at a minimum with year to date records. If you had your FICO score checked recently, this can help us determine the range of your rate more quickly. If you have a previous quote from a lender, share it with us so we can help you determine if it’s the best option for you.

Are you interested in qualifying for an interest-only mortgage? Working with the right lender can help you stay ahead of complex issues with suggestions and advice to keep the process moving. Contact a mortgage banker at Carlyle Financial today to learn more.