Interest only Loans

[yonksgirl]

DOes anyone know about interest only mortgages? My husband has 2 "dream houses" and one went up for sale and I tink that is the only way we will be able to afford it. Any advice would be greatly appreciated!

[yonksgirl]

:bump: :leavin:

[Jester]

Well they are definitely not the best loans in this new rising interest rate environment depending on the term of the loan and depending if you make enough money or have enough free cash in case of the worst.

Interest only means you're are just paying interest, no principal. Which I'm sure you know already. So if you are able to lock in say a 10 year fixed interest only and you know you will be making more money in the future, you can leverage your free cash to generate more money with something else.

However, most people don't leverage that low interest rate and instead just enjoy the leftover cash to entertain themselves. Thats where people get in trouble.


For instance we have an interest only loan for only 10% of our purchase price. We've enjoyed the low payments for 3 years, but we are now just deciding to cut that loan down till it evaporates.