Interest only mortgage

[woodall83]

Anyone heard of these interest-only mortgages? Supposedly you pay only interest on the loan for the first 15 years, then principal the rest. Supposed to give you more purchasing power and cash flow. Sounds a little hokey to me...
I'm just starting to research this, but wanted some opinions, etc. Anyone ever done this?

I'm wondering if there's any restrictions on selling later on...

[TnAndy]

Sort of like renting with the bonus of doing the maintenance and pay the property taxes......what a deal.

[joelpat]

I have an interest only loan because I am self employed. It gives me flexibility if I run into a dry spell.

I still pay principle every month, by choice, but in an emergency I can cut back. For this I pay a little bit higher rate.

[TnAndy]

For the rare, self disciplined individual, I could definitely see doing as you are......I've often told folks a similar thing....get a 30 year mortgage IF the rates and costs are real close to a 15 year one, so you are committed to the least payment, but then pay extra principle from day one and pay the sucker off quicker than even a 15 so you save a ton on interest.

But it takes that RARE individual to do it.

I've personally had two mortgages in my life and paid both off way ahead of the time on them......and have been mortgage free for the last 15 years.

I suspect the "interest only" deal appeals to those who:

A. Would not qualify to buy the house they are buying IF any principle was included because they are skating on the edge of their income now

or

B. They plan to take advantage of the fact that housing is going up quickly in their area, and they plan to sell for a profit in a short period of time.

Either A or B is a good way to get homeless if either their income drops slightly, or housing prices cool.

I've always said banks have a hardware store in the back where they will sell you all the rope you need to hang yourself.

[CThomp]

Yeah I went with a 30 year fixed. Decent rate and I plan on staying in the home for 10 years if not for who knows how long.

I thought about interest only type loans but I'm not a big fan of giving banks that much more than what I owe. I like to pay things off.

I plan on paying mine off in 15.

[Crash13]

Yeah I went with a 30 year fixed. Decent rate and I plan on staying in the home for 10 years if not for who knows how long.

I thought about interest only type loans but I'm not a big fan of giving banks that much more than what I owe. I like to pay things off.

I plan on paying mine off in 15.I'm doing the same thing pretty soon. I'm gonna pay up 2 or 3 point sup front and get a good rate on a 30 year fixed then just discipline myself to pay an extra $300 every month. If my math is correct it'll be paid off in about 18 years, an dI'll save $40,000 in interest.

[bkrahmer]

Crash13, I double-checked your numbers, and your math looks pretty good. I ran an example with a mortgage amount of 200k, and the interest savings only came to 16.7k, though. With a 480k loan, you'd be right on.

[roger g]

We can't get a fixed mortgage more than 5 years though something is nagging me that it has changed to maybe 7 or 10 years but I don't think so. Our rates can be AMORTISED(based on) over any period probably up to 35 years but FIXED on the previously mentioned much smaller time lines.
It used to be in Australia and England I think, all mortgages floated, so if the rates went up next month so does your mortgage. You couldn't get any fixed rates.




roger