Structured similarly to an ARM, this super special home loan starts you off on the right foot with a low, fixed rate.
Why pay more than you need to?
Not everyone’s built the same way. Maybe your income is a little irregular and you want the comfort of a low regular payment with the chance to pay big when you can.
The name says it all. An interest-only mortgage means you get to pay only the interest part of your home loan in the beginning years of your term, which means you’re not paying any of your loan principal. (Your principal equals the chunk of money you can borrow from UMe to buy your home!)
Paying interest-only has some definite results, like the cause and effect you probably heard about in science class. One, you get a nice low payment to kickstart your mortgage. Two, you’re going to need to make up for those low payments later with some bigger payments. So why would you want to do it? Well, maybe you know a nice chunk of change is coming your way in future! Or maybe you just know your earnings will go up.
For Your Interest
Low Initial Payments
Buy yourself time to get all your ducks in a row with lower payments for the first few years.
Choose Your Term
Decide how long you want the interest-only bit to be and how long you want to have the loan in total.
Pay Big When You Can
If you’re the type who gets bonuses or windfalls, you can drop money on your mortgage as suits you.
Interest-Only Mortgage Rates
As low as
All you need to apply for your interest-only mortgage:
The documents you need for an interest-only mortgage are pretty much the same as what you need for any other home loans! Just show us the most recent or current versions of this bunch of paperwork:
- Photo ID and proof of address because we want to know all about you
- Bank statements and proof of any other assets to show the balance is in your favor
- Tax returns (from the last two years should do it)
- Pay stubs, W-2s, 1099s and any other proof of incoming fortune
- Gift letters if some kind person is chipping in for your down payment
- Evidence of your renting history or another time you owned a home
- Credit history – we can check your credit score and you ought to take a peek too
A no-hassle loan process for an interest-only mortgage
Get a head start by finding all the documents and information in the list above.
Reach out to one of our home loan gurus to figure out if interest-only is the right move for you.
Choose if you want to apply online, over the phone, or in-person at your local branch.
We’ll give your application all the time and care it deserves then get back to you with a yay or nay, or maybe ask you for more info.
Now, there’s a fantastic chance you’ll pre-qualify for your loan, which means it’s time to start house hunting with your financing ready to go!
After you put in an offer (and it’s accepted!), we can guide you through the closing process and set you up to make your first payments.
2 great payment options, the choice is yours!
If you have a loan with the credit union, payroll deduction is a convenient way to have your loan payments automatically deducted from your paycheck.
To find out if you’re eligible for payroll deduction, contact your employer’s benefits department. If you already have payroll deduction set up with the credit union and want to set up automatic loan payments, call us at (818) 238-2900.
Automated transfer allows members to transfer funds within UMe accounts on a recurring schedule.
You can set up an automatic transfer to make your loan payment, so you won’t have to think about it each month.
To set up an automatic transfer, fill out our Share to Loan Transfer Form or give us a call at (818) 238-2900.
Interest-Only Mortgage FAQs
Here’s the thing: the main part of your mortgage is called the loan principal. That’s the part we lend you to buy a home. With most home loans, your monthly payment is split into four parts: Principal, Interest, Taxes, and Insurance.
But with an interest-only mortgage, you don’t have to pay your principal for the first few years of your loan (though you do still have to pay taxes and insurance, sorry about that!). During those first sweet years, your interest rate is low and fixed so you know exactly what’s going on.
Once your interest-only period is finished, your payments will go up because you’ll now be paying principal too. Additionally, you will be paying your principal back in a shorter period than if you’d had a regular kind of mortgage. For example, a 30-year loan term minus a 5-year interest-only period = 25 years left to pay principal.
Plus, your interest rate might be variable now, rising and falling with the markets.
Great question. It sounds a little risky because you get nice low payments lulling you into a sense of security, then, boom, you have to pay extra, possibly leaving you scrambling for cash.
But this exact situation really suits some people!
- Maybe you’re short on cash right now but you know your income is on the up and up.
- Maybe you have a stack of cash but you want to keep it for some other fancy investment that will make you more money in future when your payment goes up.
- Maybe you’ve got irregular income, through commissions or bonuses, so you can save up your money over the next few years ready for those bigger payments.
An interest-only mortgage means you’re accepting the challenge of paying off your principal in a shorter time period than usual, after your interest-only period finishes. So we need to know you’re going to breeze through and not hit a few speed bumps down the road.
People who qualify for interest-only mortgages tend to earn a little more than usual and have great credit. If that sounds like you, apply away!