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CaMacho
Sisters :)
Member since 7/06 15112 total posts
Name:
Jess
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Re: Interest Only Mortgages
You guys really sparked my interest! I found this article: CLICK
I agree that it could be dangerous for people who take this type of mortgage and think their house will appreciate. If it doesn't they can be in trouble.
But it does make sense for a lot of people (like lululu). Everyone has their own situation, but hopefully people really look into the pros and cons of every type of loan.
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Posted 11/29/06 4:40 PM  |
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SweetestOfPeas
J'taime Paris!
Member since 3/06 32345 total posts
Name:
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Re: Interest Only Mortgages
Posted by lululu
Posted by SweetestOfPeas
I still can't believe lenders were allowed to offer these "creative loans" 
it is NOT in your best interest to not pay down the principal! ESPECIALLY in this market!
Actually i think that it's great that lenders offer these types of loans, because for some people (like my huband and I) they are really beneficial. They should just be a little bit more careful who they approve for these types of loans.
Even in this market, depending on the rate you have, it may still be in your best interest to invest the money elsewhere rather than pay down principal. What would not be in your best interest is to take a loan that you realistically might not be able to afford in 5 or 10 years from now.
We have paid down a good portion (more than half) of our loan, but going forward we are planning to conservatively invest our money rather than paydown prinicpal, until our rate resets at the 5 yr. mark. Financially, this makes more sense for us.
I am not criticizing you, but a lot of people in expensive areas took out a loan like this b/c it was the only way they could afford to buy a house. when their loan re-adjusts, a lot of people will be losing their homes, and that is very sad 
It’s just not realistic. If you can’t afford a house, you need to look elsewhere. The numbers don’t lie. And many people were fooled.
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| Posted 11/29/06 4:40 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Interest Only Mortgages
Posted by lululu
Posted by SweetestOfPeas
I still can't believe lenders were allowed to offer these "creative loans"
it is NOT in your best interest to not pay down the principal! ESPECIALLY in this market!
Actually i think that it's great that lenders offer these types of loans, because for some people (like my huband and I) they are really beneficial. They should just be a little bit more careful who they approve for these types of loans.
I think it's great also- it would be hard for us to buy the house we want when we never know exactly how much or when the money is going to come in
it's very stressful to make comission only knowing you have an huge mortgage payment due- so this give us and people like a chance a way to live in the house we want- and not have to worry about if a loan funds late or if it's not a great month
somethings are beyond Jake's control- ex he closed a loan the day before thanksgiving- which normally he would have gotten paid on this month- but since there was a hoilday- he wont get paid on it until 12/15- the money's there- but we don't get it until later
this just gives us more breathing room- and when Jake has a great month- we pay a big chuck of the mortgage- it's perfect!
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| Posted 11/29/06 4:42 PM |
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SweetestOfPeas
J'taime Paris!
Member since 3/06 32345 total posts
Name:
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Re: Interest Only Mortgages
Posted by Beth1210
Posted by lululu
Posted by SweetestOfPeas
I still can't believe lenders were allowed to offer these "creative loans"
it is NOT in your best interest to not pay down the principal! ESPECIALLY in this market!
Actually i think that it's great that lenders offer these types of loans, because for some people (like my huband and I) they are really beneficial. They should just be a little bit more careful who they approve for these types of loans.
I think it's great also- it would be hard for us to buy the house we want when we never know exactly how much or when the money is going to come in
it's very stressful to make comission only knowing you have an huge mortgage payment due- so this give us and people like a chance a way to live in the house we want- and not have to worry about if a loan funds late or if it's not a great month
somethings are beyond Jake's control- ex he closed a loan the day before thanksgiving- which normally he would have gotten paid on this month- but since there was a hoilday- he wont get paid on it until 12/15- the money's there- but we don't get it until later
this just gives us more breathing room- and when Jake has a great month- we pay a big chuck of the mortgage- it's perfect!
for people like you and Jake, it makes sense. you're not people who can't afford a home, you just want a different way to pay the mortgage.
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| Posted 11/29/06 4:44 PM |
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lululu
LIF Adult
Member since 7/05 9511 total posts
Name:
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Re: Interest Only Mortgages
Posted by SweetestOfPeas
Posted by lululu
Posted by SweetestOfPeas
I still can't believe lenders were allowed to offer these "creative loans"
it is NOT in your best interest to not pay down the principal! ESPECIALLY in this market!
Actually i think that it's great that lenders offer these types of loans, because for some people (like my huband and I) they are really beneficial. They should just be a little bit more careful who they approve for these types of loans.
Even in this market, depending on the rate you have, it may still be in your best interest to invest the money elsewhere rather than pay down principal. What would not be in your best interest is to take a loan that you realistically might not be able to afford in 5 or 10 years from now.
We have paid down a good portion (more than half) of our loan, but going forward we are planning to conservatively invest our money rather than paydown prinicpal, until our rate resets at the 5 yr. mark. Financially, this makes more sense for us.
I am not criticizing you, but a lot of people in expensive areas took out a loan like this b/c it was the only way they could afford to buy a house. when their loan re-adjusts, a lot of people will be losing their homes, and that is very sad
It’s just not realistic. If you can’t afford a house, you need to look elsewhere. The numbers don’t lie. And many people were fooled.
Oh no - I know you are not criticizing. I think we both agree on this topic - people should not be approved for loans that they realistically might not be able to afford in the foreseeable future.... I am sure you dont have a problem with it being offered in the right circumstances... right? : )
The problem is that the people that work in this industry (real estate agents/mortgage brokers/lenders etc) convinced people who are not financially savvy that they could afford something that in reality, they could not. That is why so many people are going to be in trouble in the coming years, and it's really unfortunate.
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| Posted 11/29/06 4:45 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Interest Only Mortgages
[ I am not criticizing you, but a lot of people in expensive areas took out a loan like this b/c it was the only way they could afford to buy a house. when their loan re-adjusts, a lot of people will be losing their homes, and that is very sad
It’s just not realistic. If you can’t afford a house, you need to look elsewhere. The numbers don’t lie. And many people were fooled.
that's not the loans fault- that's the persons fault
you still have to use your head- just b/c some guy tells you you are approved for $999K- and you know you only make $50K a year doesn't mean you can afford the house
you have to take responisblity for yourself
everyone on here seems to know how much house they can afford- you know how much you bring in every month- and how much you have going out
alot of people saw this as a get rich quick- or the market will keep going up- they gambled and they lost-
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| Posted 11/29/06 4:45 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Interest Only Mortgages
for people like you and Jake, it makes sense. you're not people who can't afford a home, you just want a different way to pay the mortgage.
I agree 100%- it's not for everyone
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| Posted 11/29/06 4:46 PM |
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sunnyplus3
:)
Member since 11/05 8749 total posts
Name:
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Re: Interest Only Mortgages
The best advice I ever heard regarding loan shopping (it came of I/O.com BTW)
"Loan officers are salespeople, NOT financial advisors"
This is the truth, while many loan officers, brokers or whatever the case may be are quite knowledgable, many are young, very new to the industry & don't even own homes themselves.
Their job & they way the earn a living is by selling....often it could be a product that is risky, but it gets done.
Very unfortunatley, we live in a more is more society & in a mad rush to buy that mcmansion of your dream, too many people bought the wrong loans.
If everyone that took an I/O or weird ARM with a teaser rate, we wouldn't have people loosing homes. They would all be the ideals for the product like Lulu & a few others here, too bad that's not what has happened.
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| Posted 11/29/06 4:48 PM |
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Hi-Fi55
12 years...wow....
Member since 2/06 2984 total posts
Name:
Dianne
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Re: Interest Only Mortgages
IO are a great way to invest outside of your mortgage. They are not just for people to only pay off their mortgage. Sometimes there is more of a return elsewhere than on your mortgage, so you invest what you would have been paying in principal elsewhere.
A lot of RE investors do this as well as stock brokers.
You can't just expect to pay principal only for 5 or 10 years and then just have the money to make larger payments. Life doesn't always work that way. Costs of living go up too. You have to be aware of that.
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| Posted 11/29/06 4:49 PM |
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SweetestOfPeas
J'taime Paris!
Member since 3/06 32345 total posts
Name:
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Re: Interest Only Mortgages
Posted by Beth1210
alot of people saw this as a get rich quick- or the market will keep going up- they gambled and they lost-
yup! that is so true
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| Posted 11/29/06 4:50 PM |
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lululu
LIF Adult
Member since 7/05 9511 total posts
Name:
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Re: Interest Only Mortgages
Posted by Beth1210
[ I am not criticizing you, but a lot of people in expensive areas took out a loan like this b/c it was the only way they could afford to buy a house. when their loan re-adjusts, a lot of people will be losing their homes, and that is very sad
It’s just not realistic. If you can’t afford a house, you need to look elsewhere. The numbers don’t lie. And many people were fooled.
that's not the loans fault- that's the persons fault
you still have to use your head- just b/c some guy tells you you are approved for $999K- and you know you only make $50K a year doesn't mean you can afford the house
you have to take responisblity for yourself
everyone on here seems to know how much house they can afford- you know how much you bring in every month- and how much you have going out
alot of people saw this as a get rich quick- or the market will keep going up- they gambled and they lost-
Unfortunately you are giving people too much credit. In general, people are just not smart.
As for this site - you arent really dealing with a subset of the entire population. Most of us are college educated professionals....
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| Posted 11/29/06 4:50 PM |
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SweetestOfPeas
J'taime Paris!
Member since 3/06 32345 total posts
Name:
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Re: Interest Only Mortgages
just want to add that my sis & BIL have an IO loan on their house in CA. they bought it 6 1/2 yrs ago and since then, the house has doubled in value, so they are very fortunate. they're going to be selling it within a year, before their mortgage re-adjusts.
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| Posted 11/29/06 4:52 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Interest Only Mortgages
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Unfortunately you are giving people too much credit. In general, people are just not smart.
As for this site - you arent really dealing with a subset of the entire population. Most of us are college educated professionals....
I feel bad for people who got tricked or taken advantage of- but I don't think that's the case with ALL I/O loans
a majority of them are most likey dreamers- who thought they house would double in value in a year or something else like that
there are ALOT of shady people in the industry- like with all industries- which is why you need to shop around
and if it sounds too good to be true- then it probably is
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| Posted 11/29/06 4:55 PM |
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MikesWife
Wanting...........
Member since 1/06 6887 total posts
Name:
Karen
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Re: Interest Only Mortgages
IO's can be beneficial to some. Let's say that you want to buy a fixer-upper. You may want to take an IO loan so that your payments are less leaving you with additional money to make the improvements on the home. And then after 3 years when you have finished renovating your house you may want to refinance - due to the improvements your appraised value can likely increase - even in a decreasing market because you have reinvested into your property.
ETA: this is what a lot of RE investors do. When they buy a large building they may take a 5 year IO because they know in 5 years at the time of conversion they have rehab'd the property and increased its value.
Message edited 11/29/2006 4:59:07 PM.
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| Posted 11/29/06 4:57 PM |
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Hi-Fi55
12 years...wow....
Member since 2/06 2984 total posts
Name:
Dianne
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Re: Interest Only Mortgages
Posted by Beth1210
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Unfortunately you are giving people too much credit. In general, people are just not smart.
As for this site - you arent really dealing with a subset of the entire population. Most of us are college educated professionals....
I feel bad for people who got tricked or taken advantage of- but I don't think that's the case with ALL I/O loans
a majority of them are most likey dreamers- who thought they house would double in value in a year or something else like that
there are ALOT of shady people in the industry- like with all industries- which is why you need to shop around
and if it sounds too good to be true- then it probably is
You don't need your house to double for an IO to be worth it. As long as it goes up in value and, you're fine.
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| Posted 11/29/06 4:58 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Interest Only Mortgages
[QUOT
You don't need your house to double for an IO to be worth it. As long as it goes up in value and, you're fine.
it was just an example of a "dreamer"
my brother is one- he thinks his florida town house that he bought for $450K is going to be worth $1M in 2 to 3 years
he has a neg am- he is not that bright
yet graduated from a top school and works as a mortgage broker ( in FLA- not for my DH- jake would never hire him)
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| Posted 11/29/06 5:01 PM |
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MrsRbk
<3 <3 <3 <3
Member since 1/06 19197 total posts
Name:
Michelle
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Re: Interest Only Mortgages
Posted by Meaghan729
Posted by CaMacho
I actually never really knew this type of mortgage existed. Can most people be approved for an I/O mortgage?
absolutely. its easier to get approved for because they payment will be lower.
MrsRBK - your husband sounds very debt adverse - and you are the picture of what I/O's are good for - he gets a nice bonus and pays down principal with it. Unfortunately I know people with I/O's that only have them bc they can't afford to pay any principal, and figured that their house would appreciate in the near future so they can buy another house with the equity.
You hit the nail on the head with that one! He's adverse to debt of any kind. In fact, as soon as we got married he made me pay off my car because it was carrying debt. (not that I complained!) The whole idea of having a mortgage again after not having one for close to 13 years kept him up many, many nights.
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| Posted 11/29/06 5:03 PM |
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bikramaddict
mommy-to-be
Member since 8/06 4376 total posts
Name:
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Re: Interest Only Mortgages
They are not for everyone, as stated above and personally, they make me nervous.
A friend as an I/O ARM and essentionally, the outcome could be that she cannot afford her home! But that's why people - in a lot of cases - take IO's. The payments are lower. Sometimes signifigantly lower. But it will come back at you.
I looked into this...it just wasn't for me. IF I had done IO, my payments would've been a few hundred less each month for 10 years (the IO years.) But if I was still in the house and 10 years go by, my payments go up a lot because essentially, I have 20 years left to pay off the entire principal. Instead, I've opted to pay more each month with a 30 year fixed. I get peace of mind that 10 years from now, my payments will be the same as they are today.
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| Posted 11/29/06 5:09 PM |
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Hi-Fi55
12 years...wow....
Member since 2/06 2984 total posts
Name:
Dianne
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Re: Interest Only Mortgages
Posted by MrsRbk
Posted by Meaghan729
Posted by CaMacho
I actually never really knew this type of mortgage existed. Can most people be approved for an I/O mortgage?
absolutely. its easier to get approved for because they payment will be lower.
MrsRBK - your husband sounds very debt adverse - and you are the picture of what I/O's are good for - he gets a nice bonus and pays down principal with it. Unfortunately I know people with I/O's that only have them bc they can't afford to pay any principal, and figured that their house would appreciate in the near future so they can buy another house with the equity.
You hit the nail on the head with that one! He's adverse to debt of any kind. In fact, as soon as we got married he made me pay off my car because it was carrying debt. (not that I complained!) The whole idea of having a mortgage again after not having one for close to 13 years kept him up many, many nights.
Good for him (and you)! That's great to be so on the ball with your debt.
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| Posted 11/29/06 5:23 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Interest Only Mortgages
IO loans are also good if you don't plan to keep your house for long. I have a condo that is financed IO fixed for 10 years. I plan on turning it before 5 years. It's where my parents live and it beats paying rent for them and getting no deductions. They will not live there for 10 more years. The market is softer there now but the condo has increased in value since we bought it.
The IO loan serves a purpose.
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| Posted 11/29/06 5:32 PM |
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bayla
Love my two kiddos :)
Member since 8/06 7178 total posts
Name:
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Re: Interest Only Mortgages
i have a I/O b/c when we wanted to buy our condo and I was in fieldwork for my masters (so working without being paid for 7 months), so they couldnt check my work/pay background (it didnt matter that I have been working since i was 14), so we got the interest only, just to start out and get the condo, knowing we will refinance within the year. also DH is an accountant and we religiously pay additional principal EVERY month so $$ is going into our place/mortgage and not just principle (we pay what would have went into the mortgage if we had gotten a regular 30 year fixed rate), plus we plan on moving in the next 4-5 years and buying a house, so this is not a permanent living situation for now.
I/O is def not for everyone, if we knew we werent going to be paying the additional principal and that we were going to be refinancing now that I am working and making good $$$, we never would have taken it b/c it could end up in a bad sitaution, where you end up selling and then you have to pay off your WHOLE mortgage if you havent been making payments)
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| Posted 11/29/06 6:28 PM |
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skew
LIF Adult
Member since 5/05 6794 total posts
Name:
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Re: Interest Only Mortgages
Posted by Hi-Fi55
IO are a great way to invest outside of your mortgage. They are not just for people to only pay off their mortgage. Sometimes there is more of a return elsewhere than on your mortgage, so you invest what you would have been paying in principal elsewhere.
A lot of RE investors do this as well as stock brokers.
YES, YES, and YES. we have been down this road MANY times before and as mentioned, it works well for some, not well for others. all about leaverage.
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| Posted 11/29/06 8:28 PM |
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