| Interest Only Mortgages: Bad for many, good for me. |
|
|
|
|
|
forexmaestro
Contributing Member
Cash: $ 7.60
Posts: 37
Joined: 25 Jun 2006
|
| Interest Only Mortgages: Bad for many, good for me. |
 |
|
It seems to me that it's been about 2-3 years since this idea of interest only mortgages has gotten popular. The idea of getting into a bigger house and having a smaller payment is fantastic to some people. Nevertheless, the time will come when each person who has done this will reach that 5 year mark, and all the sudden their $600 monthly payment will become $3,000. I foresee a time of mass forclosures on homes; people simply walking away and turning them over to the banks. The banks will then have no choice but to start dumping them. This of course will be tough on the economy as a whole, but we have always been resiliant. It's because of this reason that I have opted to wait on buying a home for another 2-3 years. I would suggest the same to anyone. Whether it is a home to live in or a rental property, I truly think prices all over the nation will take a nosedive, maybe as much as 20 and 30%, which is significant when you are talking median home prices of $500,000, like the ones on the Central Coast of California where I live. Just my thoughts.
|
Sat Jul 08, 2006 3:35 am |
|
|
oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
|
Actually, the $600 monthly payment becomes $773 at the 5 year mark - then the principal is amortized as if it were a 25 years loan. I like those loans, they work great for buying rental houses, I prefer the ones that transition at 10 years, then the payment becomes $860/m and it amortizes over 20 years. After you have owned the houses for 10 years you will have increased the rent a few times so that you can easily cover the higher payments. But the low payments for the first 10 years allow you to buy more houses. And this isn't really so new - I had an IO on one of the houses in 1980.
|
|
Sat Jul 08, 2006 10:45 pm |
|
|
kingcalvin
New Member
Cash: $ 1.40
Posts: 7
Joined: 14 Mar 2006
|
Interest only mortgages have become the highest percentage of defaulting loans over the last 5 years. Hmmmm.... wonder why? 
|
|
Fri Jul 14, 2006 4:10 pm |
|
|
Kiaser
Senior Member
Cash: $ 43.05
Posts: 209
Joined: 12 Apr 2006
|
|
|
|
Like Coaster said , timing market dive sucks even if you are 99% sure it'll happen at a certain time.
The only thing you can count on is that the market WILL go up and down, you just don't know when, but all that means is you get into the market at anytime and if know how to play you will benefit.
The market going DOWN is actually a benefit to investors if they are in for the long haul. It gives you a chance to put more money into lower than average cost investments. It's the same thing as buying low and selling high, except if you stick it out for the long haul instead of selling at the first height then you never really need to concern yourself in timing of the market.
I see what you're saying, though, and I do believe the interest only mortgage is gonna cause it's own blow. However, things like this have happened throughout market history, and it's nice to benefit from these things, but you can still make plenty of money by getting into the market at ANYTIME if you are headstrong and stick out for the long haul (which is how you make money with investing). I guess what I'm saying is that the high chance the market does get hit hard because of interest only is absolutely no reason to putting off buying 2-3 years.
|
|
Fri Jul 14, 2006 8:02 pm |
|
|
jasonm
New Member
Cash: $ 1.00
Posts: 5
Joined: 03 Aug 2006
Location: Southern Cali
|
| Interest only loans |
|
|
why not get a hybrid???
30 year fixed with the first 5,7,or 10 years Interest Only.
It works great for a lot of people. In 5 years from now aren't we all supposed to get incremental raises. Cost of living will go up and rent will too. Buy when you can afford it no matter what the market does? There is one thing for sure "Real Estate will appreciate" that's why it's the biggest investment one can make. Up and down and up and down...The house I grew up in is worth $595,000 and cost $104,000 about 20 years ago.
|
|
Thu Aug 03, 2006 8:34 am |
|
|
|
