I was going to refinance and have a 3yr interest only then fixed. How exavctly is this I never heard of it?/?

my interest would be to high for my mortgage company I now have, "my credit score is not to good." so another company said this coud be a way to go???? Would it be??
Additional Details
after the 3yrs they said for $200.00 I could change to a fixed.

A 3 Year ARM is:
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1. Fixed for the first 3 years at a "start" or "teaser" rate

2. Adjustable over the remaining term of the loan (so if it's a 30 year loan a 3 year arm would be adjustable for 27 years)

Interest Only loans:
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1. Are interest only generally for 5 or 10 years, after which time the payment increases to cover both principal and interest.

2. Look at your Truth In Lending statement to determine how many months your payments will be interest only.

Before Refinancing, you have to know why you are doing this.
What benefit does refinancing provide you?
Some of the most common benefits are as follows:
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1. Pull Cash Out - Either to bank some tax free cash from loan proceeds to make investments or make home improvements.

2. Consolidate Debt - Reducing your overall monthly payments by paying off high interest unsecured credit cards is a good, but sometimes over-used reason to refinance (since a lot of people go back out and max out their credit cards 6 months after paying everything off)

3. Lower Mortgage Payment - this is the most common reason, and can be accomplished a dozen different ways, such as lower rates, interest only payments, negative amortization, longer term mortgages, etc. Many of the techniques used to lower your mortgage payments are very sophisticated, so buyer beware. Lear as much as you can about how these mortgages work if you don't trust your mortgage broker.

4. Take advantage of increased home equity or credit score:
If your credit has improved dramatically from when you originally took out the loan you're currently in, or your home is worth a LOT more than it was then, you might be able to qualify for significantly better financing than you did previously. However, even loans written with no money down in 2004 may have lower rates than loans for the best credit borrowers in 2007 due to market conditions governing interest rates.

5. Fix your rate: This is one of the most popular reasons in todays day and age, as many of the loans written over the last few years were ARM loans, adjustable rate mortgages which were fixed for 2 or 3 years and are now "going variable" and adjusting as frequently as each month.

Recommendation:
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Get a 30 year fixed mortgage with an interest only option or multiple payment options and at least 10 years of interest only payments available. You will need decent credit, but in exchange you can get a loan which offers you the security of a 30 year fixed rate, which will never change, with the flexibility of lower payment options for the times when you need to make a lower interest only payment or for tough months when you need to defer interest by tapping into the equity in your home.

RUN, don't walk, away from this re-finance option.

If your credit score is "not too good" fix your credit, then pursue the refinance.

No. Don't do it. It is a trap. If you don't qualify for a regular loan now you will not after paying high interest for 3 years. There are HUGE commissions on loans, you can't trust most of them.

Stick with the traditional loans and with brick and mortar businesses, nothing online.

If your credit isn't good, you are going to end up with lousy loans, negative amortization loans, balloon payments, etc. Don't just close your eyes and hope for the best because a lousy loan that you don't understand most likely will cost you your house. Get a roommate and use that rent to start paying down the loan you currently have and stay away from any refi right now.

No! This is a horrible thing to do. If the interest is too high now, what's going to happen in 3 years when you have to start paying principle too?

If you can not afford a 30 year fixed mortgage, then you can't afford the house. Look into less expensive housing.

do your research. I heard a financial advisor say never do an interest only. i think it may be ok if you plan to live there the entire 30 years because then the interest is even... unsure but heard it was not a good thing.

Depending on your credit score this might be an option. Because if you can't afford to take a fixed rate right now paying interest and principle this is way to go. But again it depends on your credit someone can tell you that a 640 is bad credit and make you get into loan that isn't right for you. Please if you have any questions please let me know.

Interest only loans are what more people get in trouble with and that is why they are tightening up on mortgage companies who offer this type of loan. Most people think its great until you get your balloon payment and don't have the money to make that payment. Then before you know it your in foreclosure and once it sells at auction, and if the lender happens to lose money on that auction,guess who they go after for that loss(legally). That is what those mortgage companies prey on, people who don't understand how the loan process really works.

Well that is one way of helping you pay your mortgage with a low payment because you are "only" paying off the interest. But think about this....if you go the route of taking the interest only....you are not paying anything off of your principal balance the first three years and that to me is a big waste. You should ask about an adjustable rate which is like a fixed rate for so many years. The only reason I say this is because you can be in the mortgage for say two years and have it fixed while your credit is going back up and the refinance into a good low rate. Have you been on time with your payments now? Is your score below a 500? If you have been on time and do have a score below 500 you can still be helped. I wish you the best of luck and think about your choice wisely.

Whether it's a good deal depends on your income and whether it will go up. Interest only means that you pay only interest, and you don't pay any principal, so that if the value of the house stays the same, you don't build up any equity either. You will always have the same amount to pay off.

If the value goes up, which it may in the future, then you will have some equity (profit) if you sell. It will probably go up, but it could go down, in which case you will then owe more than you borrowed, because the house will be worth less than the principal you owe and you will have to come up with the difference. in order to pay off the loan.

If you expect your income to go up, then you can switch over to a conventional loan, like a 30-year repayment.

Whether it's a good deal is hard to say. Depending on your credit it may be the best you can do.

The other option is to save up enough money so that you can make a down payment. The larger the down payment you make, the better the loan you can get for the rest of the purchase price.

Shop around! Don't take a loan just because one guy says it's the best you can get.

his words were I found A (sucker) SHE WILL TAKE THE BAIT HOOKLINE AND SINKER and that the way it was

I suggest that you don't refinance at this time. You need to stay with the current loan and work to pay this payment on time for the next year or so. Then try again. You need to get your credit back to "good" before you try to refinance otherwise you will get a crappy loan and end up loosing your house because the payments will in the long run be much worse.

DO NOT GET A INTEREST ONLY LOAN!!!!! The broker is trying to rip you off by getting a big fat commission and doesn't care if you'll be able to meet your payments after the 3 years is up. Don't get an ARM either - there are hundreds of thousands of people losing their homes b/c of these kinds of loans.

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