2007-08-08 13:05:30 · 6 answers · asked by adrift feline 6 in Business & Finance ➔ Renting & Real Estate
Anyone can cry the boogie man is out to get you when they don't understand what is happening or what they are doing.
Like anything you do in life you have to understand the product being offered you.
An interest only loan works well for people that are gonna stay in their home for a number of years and have an exit solution when the time come for the loan to adjust or is due.
If you are gonna get an interest only loan and hope for the best when it becomes adjustable or is due you would not normally need an interest only loan.
Now for those that are working and don't have enough money to make the monthly mortgage payment on a fully amortized loan but can make the monthly payments on an interest only loan with a secure fact that in the future they will get a raise or the wife will be going back into the work force then an interest only loan may work for you.
Interest only loans are not bad in itself, the bad thing is people don't have a plan when the loan adjust or they are in need of a refinance.
There are plenty of people that have interest only loans and they work really well for them.
The only ones you hear about are the ones that are complaining is because they did not plan properly and now are claiming they were lied to.
Just remember there are loan docs to be signed. It is up to you to sign the loan docs. If something is in the loan docs that was not discussed by you and your mortgage broker,please don't sign the loan docs.
If you sign the loan docs which explain all about your loan, the adjustments, due dates, and other important facts about your loan,don't cry foul when you are not able to make the payments or the mortgage payments adjust, or the loan is called and due.
Don't blame anyone else for a mistake you made by not properly planning for your monthly mortgage payment. You know if you are gonna be in line for a raise or your wife is gonna go back to work, or you intend to sell the house to avoid the adjustable or the refinance.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2007-08-08 13:24:54 · answer #1 · answered by loanmasterone 7 · 3⤊ 0⤋
Do not fall for the oldest trick in the book. Why do you think there are so many people losing their homes. Interst only loans have a balloon payment that is due towards the end of the loan and most people do not have the funds and are not prepared for such a substantial lump sum amount at one time!
Now you have a little better understanding of creative financing and why some mortgage companies are folding because they got caught!
2007-08-08 13:15:51 · answer #2 · answered by Anonymous · 2⤊ 0⤋
You pay only the interest on the loan for a specified period of time.
Given the right market and circumstances it can be a great tool.
We have one with interest only for 10 years. We plan on selling our house in 1 1/2 years and the loan lowers our monthly expenses which allows us to handle to rental properties out of state.
You can still pay towards the principal if you chose and you can pay off the loan whenever you would like.
2007-08-08 13:11:21 · answer #3 · answered by Tim 7 · 1⤊ 0⤋
Be vary wary of a loan like this-it looks attractive, but it can be tricky. Besides, why on earth would you want to never pay down the principal? Get someone to look over the contract before you sign, and then take it to an accountant.
2007-08-08 13:09:26 · answer #4 · answered by katiesquilts 4 · 1⤊ 1⤋
not in todays market---don't go there and do not accept ARMs or any other creative financing scheems.
in todays market the only safe loan is a traditional loan ---20% or more down, 30 year fixed rate - no prepay penalty loan.
good luck :)
2007-08-08 13:10:53 · answer #5 · answered by Blue October 6 · 1⤊ 3⤋
its for people that want to maintain their principle balance and apply nothing to the equity
2007-08-08 13:16:41 · answer #6 · answered by CW L 3 · 1⤊ 0⤋