Global Banking News-April 9, 2013--Danish central bank's rethink on interest only loans welcomed by mortgage bankers(C)2013 ENPublishing - http://www.
Denmark's central bank governor, Lars Rohdesaid's support for interest only loans has been welcomed by mortgage bankers after a proposal to phase them out was introduced recently.
The proliferation of what Fed chairman Alan Greenspan dubbed exotic mortgage products such as adjustable rate loans, piggyback loans, interest only loans, and home equity loans, whose monthly payments can as much as double if interest rates rise to not unfathomable levels, as well as mixed economic signals such as choppy job growth, and the way real estate appreciation has exceeded salary increases have provided fuel for many an apocalyptic scenario.
Interest only loans, which offer cheap payments for the first few years, convert to standard amortization mortgages after a set period of time, wherein the buyer has to take on both principal and interest payments.
Those chickens will begin coming home to roost later this year as payments on adjustable and interest only loans rise.
She added that, while interest only loans have their place, many buyers used such loans to qualify for more house than they could otherwise afford.
For instance, we're seeing greater demand for interest only loans
and a wider range of adjustable rate products.
Typically, the interest only loans
convert to fully amortize adjustable rate loans in five years.
Effective December 8, 2003, NovaStar's Interest Only Loans will include interest-only payments for five years with an adjustable rate mortgage or for 10 years on 30-year fixed rate.
Our Interest Only Loan option will give brokers another tool to succeed," said Lance Anderson, president of NovaStar Mortgage, Inc.