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| Benjamin |
 Posted: Sun Feb 20, 2005 2:59 pm Post subject: Interest Only Loan's...Danger, Danger? |
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I can see the advantages of interest only loans. Such as lowering your payment quite a bit each month. Still, something seems odd about having this huge debt hanging over your head that isn't depleting whatsoever.
Considering amortization schedules you pretty much put everything towards interest in the beginning anyway.
Makes sense to maybe use this loan type if you have a quick turnaround buying and selling for profit. You'd have extra money to work on the house before you sell.
I guess as long as your house goes up in value it'd all work out in the end anyway. |
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| madmoneyman2000 |
| Posted: Tue Aug 08, 2006 5:42 am Post subject: |
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| so this type of loan is for real estate person who buys a house cheap and resales it for a bigger profit? |
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| MrT |
| Posted: Tue Aug 08, 2006 6:11 am Post subject: |
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Investing Sr. Associate
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| No, I think they are mostly used by people who either think they will be moving in a few years, or think they will be getting a big raise soon, so it would be justified to purchase a larger home now and enjoy the extra comfort. Of course, these loans don't last very long, so you really have to refinance quickly I think before having to increase your payments a lot. Last time I checked, the interest rates on these loans have gone up a lot lately, so I think it would be hard to justify one over a 30 year loan. On top of that, the terms vary widely depending on the mortgage company. It seems like a lot of extra legwork is needed to really understand what you are getting into on these loans. I imagine this doesn't happen often. |
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| madmoneyman2000 |
| Posted: Wed Aug 09, 2006 6:07 am Post subject: |
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| poornewb |
| Posted: Tue Aug 15, 2006 9:36 am Post subject: |
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You can get an Interest only loan for up to 10 years. Seeing as how the home cycle seems to be on a 7 year cycle?? I would not steer clear of doing any real estate deal because of what is going on in florida and Cali. Unless of courst your in Florida or California. Just goes to show ya if you take out all the fruits and nuts in california your still left with a big ol bowl of NUTS!!
Of course I live in Texas were they still cant build them fast enough. |
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| Dave Rathbun |
| Posted: Tue Aug 15, 2006 10:22 am Post subject: |
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CFO
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From what I understand, interest only loans are for folks that want to own a house but can't afford the full payment. So they are either banking on the fact that (a) their house value will go up, or (b) they're not interesting in owning and interest payments are cheaper than rent, or (c) they're expecting a windfall of some sort at some point in the future.
In many high-priced property areas an interest only loan allows you to get more house than you could normally afford. But as has been stated, you generate zero equity with your payments, so it has to come from property appreciation. If your property is static or - worse - depreciates - then you're essentially building negative equity. Meaning you own something that is going to cost you more to get out of than it did to get into. That's a fairly inefficient investment strategy if you ask me. 
Think of it as a "jumbo" loan on steroids. A jumbo loan lets you start out with a smaller payment but requires an increased payment (or a lump sum) at some point in the future. It seems that an interest-only loan simply takes that idea to the extreme. |
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| efflandt |
| Posted: Tue Aug 15, 2006 4:51 pm Post subject: |
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I just read about someone in MI who refied with an ARM 2.5 years ago borrowing $235k on a home appraised at $255k, now trying to refi again to avoid $2400/mo payments and rising interest rates. But appraisals are coming back at $210-215k while current principal is $229k. The slump in the automakers could be affecting property values there.
So if someone has an interest only loan and the housing market slides, they may not be able to just walk away without still owing money unless they had a big enough down payment. |
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| franklindave |
| Posted: Fri Feb 08, 2008 6:23 am Post subject: HARD MONEY LOANS FOR YOU!! |
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Hello BENJAMIN
let me grant you a loan so you can figure thing out,just contact me with this email adress peterfunds@yahoo.com so that i can help. Thanks
best regards.
Mr peter johnson. |
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| Do5 |
| Posted: Fri May 16, 2008 10:08 am Post subject: |
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Investing Sr. Associate
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| Only people who I have seen benefit from the intrest only loan is where property values soared in a short period of time and the house was sold within 2 years. |
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| prs1065 |
| Posted: Fri May 16, 2008 11:02 am Post subject: |
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| frusnak |
| Posted: Sat May 17, 2008 4:27 am Post subject: |
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CFO
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| prs1065 wrote: | | i would never have 1. |
I agree with you 100%  |
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| spencer |
| Posted: Fri May 23, 2008 3:33 am Post subject: |
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| I would never take out an interest only loan. It's way too risky for me. |
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