Posted by DellaCa on 7/19/06 2:03pm
Msg #134085

Interest only loans

I am seeing a lot of interest only loans I thought since the rates are on the rise we would not see many of these.
In your opionin why would anyone get an interest only payment? I guess the circumstances would be the factor for some people to take out these kinds of loans.
I had one last night that are now in an inetrest ony for 5 years then they are going to do it again with same company for another 5 yrs. also paying extra on the principal all along. They said this would allow them to pay more on the principle than they are now. Sounds like a plan to me ( you know how some start talking and they don't stop until you leave) But my thought was there is something you lo isn't telling you.
Some times its scary to see what people are doing to thier morgtage. but then maybe I'm reading more into it than is there. Just wondering here.

Reply by celeste pafford on 7/19/06 2:11pm
Msg #134091

Several reasons for this. People are trying to qualify for much more than they should, so with interest only, payments are made easier, but what I have seen by these tpye of borrowers is that when it comes time to do another refinance, their balance is going to be more than what they originally refi'ed for the first time. It all gets tacked onto the loan amount thus adding more to the balance.

Reply by MelissaCT on 7/19/06 4:20pm
Msg #134137

My dad was laid off for 2 years (after being with a company for 20) and had just about exhausted his savings. He didn't want to ring up the credit cards, so he took out an interest only loan. For him, it made sense -- got some cash out equity for living expenses and was able to keep the house by making much smaller payments. (He was only at 25% LTV with this deal, too!)

He was recently hired as a FT employee at a company & has now refi'd into a fixed rate mortgage.

Thsi is one example of how this loan product can make sense for a home owner. I've also seen borrowers that are planning to sell in a few years take this type of product.

Reply by DellaCa on 7/19/06 5:04pm
Msg #134144

I see that make sence Melissa , so it depends a lot on the reason you would do this as far as if it would be a good thing for them or not.

Reply by Stamper_WI on 7/19/06 6:58pm
Msg #134157

I did ine myself knowing I would sell when my youngest went off to college. Worked out great!

Reply by hcampersFL on 7/19/06 10:59pm
Msg #134191

I have one also. We did it for a fixed rate for 5 years. I always pay above the payment and am reducing the principle every month. The intrest rate was great. 5.25 with an adjustment once a year after 5 years of only 1%. Yes it can go up after 5 years but we don't plan on being in the house in 5 more years. Works for me.