Planning on doing an interest only loan on a home we will be selling in less than 6 months. Is this a good idea? Is there small print? I'm thinking the lower mortgage payment would be a good idea, since we are just flipping the house.
2007-01-25 03:08:26 · 6 answers · asked by True Dat 4 in Business & Finance ➔ Renting & Real Estate
There is always fine print...and you should read it carefully before you buy the flip house.
Especially look at penalty clauses for paying the loan off before its term. There are probably more cost clauses and other surprises.
Get a blank form from your lender ahead of time so you can read it carefully and ask questions
2007-01-25 03:28:59 · answer #1 · answered by bob shark 7 · 1⤊ 0⤋
This strategy seems to be based solely on the expectation that the house will rise in value. An interest only loan will not add anything to your equity in the house so your only gain will be whatever the house appreciates on the market in 6 months. What happens if the housing market stagnates or goes down in your area and you decide to hang onto it for a while? You can do that, but your ownership of the house will not be growing. It's a gamble, but house flipping is. You just have to be prepared to live with the consequences should your gamble not pay off.
2007-01-25 11:16:28 · answer #2 · answered by Caper 4 · 1⤊ 0⤋
It probably makes sense. If truly flipping in 6 months, there will be very little difference, as principal buildup at very beginning of a 15 or 30 year mortgage is negligible
2007-01-25 11:25:16 · answer #3 · answered by jim06744 5 · 1⤊ 0⤋
All companies are different. As I'm sure you are aware, you have a balloon payment at the end of the life of your loan which if you're flipping, shouldn't be a big deal to you. I would only wonder about a penalty for early payoff.
2007-01-25 11:18:07 · answer #4 · answered by koral2800 4 · 1⤊ 0⤋
I think what that means is that your payments only go towards the interest and not towards the principal. So basically you are renting from the bank. In a flip, it is probably a good idea.
2007-01-25 11:12:24 · answer #5 · answered by Militant Agnostic 6 · 1⤊ 0⤋
Great idea / Bad idea. Great idea for the money it will allow you to keep in your pocket. Bad Idea because you wont be paying on the principal which will increase the return you will recive when you sell the house.
2007-01-25 11:16:09 · answer #6 · answered by jrizzle 1 · 1⤊ 0⤋