"If this is a soft landing, it's not a plane I want to be riding on."

[GaryC 7]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

If your making regular principal payments then you just in the same boat as someone who has a regular mortgage. Too many that get interest only loans do just that, pay interest only, counting on the hope that prices will go up. Long term they usually do but on a downturn they are loosing money if they have to sell for some reason.

[Ban Hammer 14,713]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

usually those interest only loans are adjustable rate mortgages too.

[w¡n9Nµ7 §£@¥€r 123]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

The key is to ensure that if you had to sell in a hurry (for whatever reason) that your outstanding mortgage balance isn't more than the price you can sell your home for. If you can keep that balance at the appropriate levels throughout the time you own the home, I'd say it's ok.

[dalegg 143]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

If your making regular principal payments then you just in the same boat as someone who has a regular mortgage. Too many that get interest only loans do just that, pay interest only, counting on the hope that prices will go up. Long term they usually do but on a downturn they are loosing money if they have to sell for some reason.

No because I can get a much better interest rate on an interest only loan. The one I am looking at is 3.75% fixed for 5 years before it goes into an adjustable. The same company will offer a 6% fixed rate for 30 years on the same amount, but if I take the 3.75% loan and pay the same amount total to the loan, I will pay a lot more principal in this 5 years than otherwise. Even better, if I don't pay any principal, I can put that same extra money into a high interest savings account- say 8 % APR, let it build and in 5 years pay an even larger chunk of the principal off.

All I have to do in 5 years is restart the program over for a cost of about $2500, which is made back early on in the loan.

Edited January 5, 2007 by dalegg

[mawilson 2,133]

No because I can get a much better interest rate on an interest only loan. The one I am looking at is 3.75% fixed for 5 years before it goes into an adjustable. The same company will offer a 6% fixed rate for 30 years on the same amount, but if I take the 3.75% loan and pay the same amount total to the loan, I will pay a lot more principal in this 5 years than otherwise. Even better, if I don't pay any principal, I can put that same extra money into a high interest savings account- say 8 % APR, let it build and in 5 years pay an even larger chunk of the principal off.

That's very clever.

[w¡n9Nµ7 §£@¥€r 123]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

If your making regular principal payments then you just in the same boat as someone who has a regular mortgage. Too many that get interest only loans do just that, pay interest only, counting on the hope that prices will go up. Long term they usually do but on a downturn they are loosing money if they have to sell for some reason.

No because I can get a much better interest rate on an interest only loan. The one I am looking at is 3.75% fixed for 5 years before it goes into an adjustable. The same company will offer a 6% fixed rate for 30 years on the same amount, but if I take the 3.75% loan and pay the same amount total to the loan, I will pay a lot more principal in this 5 years than otherwise. Even better, if I don't pay any principal, I can put that same extra money into a high interest savings account- say 8 % APR, let it build and in 5 years pay an even larger chunk of the principal off.

All I have to do in 5 years is restart the program over for a cost of about $2500, which is made back early on in the loan.

If you feel interest rates will remain manageable in 5 years, go for it. Many people aren't willing to take that risk.

[Ban Hammer 14,713]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

If your making regular principal payments then you just in the same boat as someone who has a regular mortgage. Too many that get interest only loans do just that, pay interest only, counting on the hope that prices will go up. Long term they usually do but on a downturn they are loosing money if they have to sell for some reason.

No because I can get a much better interest rate on an interest only loan. The one I am looking at is 3.75% fixed for 5 years before it goes into an adjustable. The same company will offer a 6% fixed rate for 30 years on the same amount, but if I take the 3.75% loan and pay the same amount total to the loan, I will pay a lot more principal in this 5 years than otherwise. Even better, if I don't pay any principal, I can put that same extra money into a high interest savings account- say 8 % APR, let it build and in 5 years pay an even larger chunk of the principal off.

All I have to do in 5 years is restart the program over for a cost of about $2500, which is made back early on in the loan.

If you feel interest rates will remain manageable in 5 years, go for it. Many people aren't willing to take that risk.

also of note is arm's are aimed at those who expect to move before the loan goes up.

[w¡n9Nµ7 §£@¥€r 123]

Why is this bad for interest only loans?

Interest-only loans are only good if you expect the value of your property to increase.

Why is that? What if you are not just making minimum payments?

If your making regular principal payments then you just in the same boat as someone who has a regular mortgage. Too many that get interest only loans do just that, pay interest only, counting on the hope that prices will go up. Long term they usually do but on a downturn they are loosing money if they have to sell for some reason.

No because I can get a much better interest rate on an interest only loan. The one I am looking at is 3.75% fixed for 5 years before it goes into an adjustable. The same company will offer a 6% fixed rate for 30 years on the same amount, but if I take the 3.75% loan and pay the same amount total to the loan, I will pay a lot more principal in this 5 years than otherwise. Even better, if I don't pay any principal, I can put that same extra money into a high interest savings account- say 8 % APR, let it build and in 5 years pay an even larger chunk of the principal off.

All I have to do in 5 years is restart the program over for a cost of about $2500, which is made back early on in the loan.

If you feel interest rates will remain manageable in 5 years, go for it. Many people aren't willing to take that risk.

also of note is arm's are aimed at those who expect to move before the loan goes up.

I had a 5/1 ARM which I recently refi'd. When I got it, I thought I wouldn't stay here very long. Two years later, I was married and... everything changed

[RaspberrySwirl 20]

Man, I wish I understood any of this mortgage, refinancing, ARM, APR talk. >.<

I want a house!

[Fandango 1,440]

I just closed a house with someone who got a 10 year interest only loan, then fixed for the next 30. At a very decent rate too, but I can't remember exactly...it was 6.something.

Yes, I know a 40 yr loan...but it's good to at least get into the market!

[dalegg 143]

If you feel interest rates will remain manageable in 5 years, go for it. Many people aren't willing to take that risk.

I believe that is what they refer to in technical terms as "the rub"

[yogib37 3]

Renting sucks.

Yes it does. I have owned my own home for 22 years. But since my life is in flux until Luz gets here I have to live with it. Trust me, when she is here and I have repaired my credit sufficiently I will own a home again.

also they have many programs with people with all types of credit. So owning when Luz gets here is not out of the question

yogi