Interest only loans

Does anyone do this?
A friend of ours suggested we do this- as long as we only stay in the house for a few years- which is the plan.
Does anyone have any info or opinions?
Seems too good to be true.

Re: Interest only loans

Opinion: They are too good to be true, unless you really are managing the money that would be going to the principle and are very disciplined in your spending. I have heard of folks getting them and still paying down the principle but that seems rare. In many cases they are only fixed rate for a short period, not good, and allow people to buy more house than they would normally afford which isn't always a good thing.

In short, I'd just be careful and personally wouldn't do it.

Re: Interest only loans

Also after talking to a real estate friend of mine he told me it looks like soon you wont be able to get the Interest only loans. They are thinking of getting rid of them...

Scott

Message edited 6/8/2009 3:47:29 PM.

Re: Interest only loans

I use interest only loans for investment property. Read that as no money down.

I just refinanced from a 1st & second mortgage into a fixed rate loan for one rental property since the equity was there and I did not need to put much cash into it....only $2,603.15 was due at closing

I recommend that you call a mortgage broker.

You can find some preliminary, helpful info here.
http://www.interestonlyloans.com/

payment calculator is here - scroll down
http://www.interestonlyloans.com/interest_only_mortgage_calculator.html

Re: Interest only loans

We have one and it's horrible. Please don't do it. We decided to sell and buy something else at a fixed rate. It would be a better idea for us to cash in on the equity, buy something else and get a new loan.

From experience, I wouldn't do it. Luckily we paid down some principle or else we would be selling and maybe not profiting at all. you don't know what life throws at you may not be able to predict how long you will actually be there.

Re: Interest only loans

Like our mortgage guy told us, the more creative you have to get with a loan, the more likely you cannot afford the house you are getting. If i were you I would save as much as you can, so that you can get a conventional type mortage. There is less risk.

Re: Interest only loans

Re: Interest only loans

We have one and it works well for us. You need to do the research and make the decision that works best for you.

There is also a difference between and IO and an IO with an ARM. make sure you know all the facts.

Re: Interest only loans

We were considering this, but then after reviewing information about them, we decided they weren't good for us. You absolutely need to pay the principle down also, or you will be stuck with very big payments in time.

One thing to keep in mind about them is that if you pay only interest, you are not earning equity on your home. '

From what I read, they are good if you are treating this as an investment, or if you want to invest your money in other things. They can also be good for people who do not earn a steady salary or work on commission.

Re: Interest only loans

Agreed. We have one and its stricly because my DH works off commissions and we can easily invest money elsewhere. We find it easier to have a lower monthly payment that we HAVE to pay and then we always apply extra towards our principal. It was just easier for us to know that we were only obligated to make a smaller monthly payment. It does work for some people...just have to explore your options.

Re: Interest only loans

Re: Interest only loans

bump

Re: Interest only loans

we have a 10 year fixed io mortgage. The rate is fixed for 10 years. We pay down some principle each month it works for us cause we are not going to be in this house for more than 10 years besides we could always refi...