Whether you are buying a house, refinancing your first or second mortgage or borrowing against the equity in your personal residence, secondary home, lot, acreage, non-owner occupied investment property or other real estate you already own, this information can help you decide if an Interest-Only Loan and Mortgage is right for you.

An Interest-Only Loan and Mortgage can be complicated. If you do not understand how it works, you should not sign any loan contracts or documents, and you might want to consider other types of loans.

Interest-Only Loans and Mortgages allow you to pay only the interest on the money you borrow for a specified period of time. For example: on an Interest-Only Loan you will be required to pay
interest, either monthly or quarterly, until the loan maturity is reached. Voluntary principal payments may be made at any time; however, they are not required. If you pay only the amount due (interest), then at the end of the loan, you will still owe the original amount you borrowed. Your loan will have a balloon payment and the entire outstanding balance will be payable in
full. At that time, you will usually need to refinance your loan to pay it, or sell your home if you cannot refinance the loan.

Read your closing documents carefully to be sure you understand the product you are selecting.

Additional Information

Equity in your Property – If you make interest-only payments (and you make no voluntary principal payments), your payments are not building equity in your property. This may make it harder to refinance your Loan and Mortgage or to obtain funds from selling or refinancing your property.

Whitney National Bank does not have prepayment penalties in any of our Loans/Mortgages described above. You may pay on the principal balance at any time or prepay the loan in full – all without penalty.

Your monthly payment will not include an amount to cover taxes and insurance. In some mortgages, your monthly payment includes both principal and interest and an amount to cover real estate taxes and home insurance – and your lender pays your taxes and insurance out of these funds. Monthly payments to Whitney will not include any amounts for taxes and insurance.
Unless you have another mortgage on your Property where your other lender pays your taxes and insurance, you will be responsible for paying real estate taxes and insurance premiums
when the bills arrive, including flood insurance, if applicable. When you are comparing mortgages, or deciding whether you can afford a mortgage, you need to consider whether or not the monthly payment includes an amount to cover estimated taxes and insurance.

Sample Interest Only Versus Five-Year

Term Loan/Mortgage Comparison

For comparison purposes only – not actual loans available.
Estimated payments do not include any amount for taxes and insurance.

*Assumes a 31-day month and is interest only.
**Includes principal and interest payment.
***Assuming you make no principal payments during the five years.