Interest-Only Mortgage?

[StewiesMom]

I know its popular now and its risky, but does anyone have one? I am thinking about getting one temporarily and then re-finance a year or so down the road.

The real estate market is still hot here, so I know that anything I buy will appreciate in value, so that part isn't scary.

What do ya'll think?

[Lexi Rae]

as a matter of fact, my brother is doing that in florida , buying his house
from his x wife.. he as to do it that way for awhile cause he doesnt have
alot of money.. i guess if your strapped, thats the way to go

[RowdysMom]

There was a thread about this not long ago - maybe you can search and find it. If I remember correctly, the general "tone" was that it was an OK thing to do, IF the real estate market is expected to rise, if not, then of course, it could be problematic.

If you plan to refinance when you can afford a higher payment, it seems it would be a good thing to do in the short term.

Good luck!

[StewiesMom]

Rowdy's Mom - I was thinking the same thing - because I am throwing my money away in rent anyway, so why not just throw it away toward something that I can eventually call my own? Thanks for the tip. I'll search for the thread!

[xxmxaxrxyxx]

my thoughts exactly...that was why i signed the contract back in Sept..my house should be coming to a close here in May...woo-hoo can't wait...

[StewiesMom]

Originally Posted by xxmxaxrxyxx

my thoughts exactly...that was why i signed the contract back in Sept..my house should be coming to a close here in May...woo-hoo can't wait...

Congrats, Mary! That must be so exciting!!! what kind of house did you buy? Is it in Kansas?

[RowdysMom]

Did you find the thread?

Also, you are right about throwing money away on rent - you almost couldn't lose on the interest only mortgage, if you didn't over pay and if the real estate market didn't crash - then even if you had to sell the house, rather than remortgaging, you would come out the same as if you had been renting. But then, i'm no expert!!!

[StewiesMom]

Originally Posted by RowdysMom

Did you find the thread?

Also, you are right about throwing money away on rent - you almost couldn't lose on the interest only mortgage, if you didn't over pay and if the real estate market didn't crash - then even if you had to sell the house, rather than remortgaging, you would come out the same as if you had been renting. But then, i'm no expert!!!

Yes, I found it. thanks. I've been stalking Dena on YT chat, too. I want to ask her some questions since she went in that direction.

The property in Chicago (city PROPER, I can't speak for any of the suburbs) is steadily appreciating. My friend makes 35k per year and she got preapproved for a mortgage of 250k. Obviously, she can't afford to pay that much, so its important to figure out how much you can afford monthly before you buy. I think that the mistake that a lot of people make are just looking for houses for whatever price they get preapproved for, then they go over their heads and can't ultimately make the monthly payment. Its really scary to think about!

[my2boyz]

Interest only mortgages can be very dangerous so please be careful. A lot of people are losing their homes right now because they took interest only mortgages out a few years ago and now the terms are changing, the upfront 'teaser' rate is gone, they've paid nothing towards the principal on the home, the property value didn't rise like expected and they can't handle the new payment. If you're planning to refinance in a few years anyway why not check into a balloon mortgage? You borrow the money for 3 or 5 years but the payment is figured just like it's a 30 year loan so it's not bad...at the end of the 3 or 5 year term you refinance at the current interest rate. At least that way you would be paying something towards your prinicipal and not just the interest. You can also get a little better rate on a balloon as apposed to a regular 30 year loan. Your best bet would be to sit down with your banker or mortgage broker (if you haven't already) and see what would be best for you...now and in the near future. Have them figure the $$ you would save on the mortgage verses what it will cost you to refinance again in a few years. Sometimes things look good in the beginning but if you really look into them it's not such a good deal. If you can't afford to pay the full amount now are you sure you'll be able to a few years down the road?
Good luck with your decision!

[JeanieK]

If you can't afford to pay anything towards the principal now, what makes you think you'll be able to a few years from now. Buy the home that you can afford by getting a conventional mortgage. Don't count your chickens before they hatch.

If in a few years you can afford a larger payment and want a larger house, you can sell and get and get a different one.

The only ones that are coming out ahead on these intrest only mortgages are the banks.

Just live within your means.

[StewiesMom]

Originally Posted by JeanieK

If you can't afford to pay anything towards the principal now, what makes you think you'll be able to a few years from now. Buy the home that you can afford by getting a conventional mortgage. Don't count your chickens before they hatch.

If in a few years you can afford a larger payment and want a larger house, you can sell and get and get a different one.

The only ones that are coming out ahead on these intrest only mortgages are the banks.

Just live within your means.

I am renting an apartment for 700/month. I figure why not pay a couple hundred more a month, rent out a bedroom to one of my friends and own something, instead of throwing my money away to my landlord. The only person is coming out ahead now, is not me, its my landlord. I am not sure that I am able to afford ANY home with a conventional mortgage. I am looking into getting a starter 2 bedroom condo instead of renting. It is possible that I can afford a house with a regular mortgage, but we'll see after I sit down w/ my broker again.

I know I will be able to afford a larger mortgage payment a few years from now because my career is just taking off, I just got an awesome job this week and there is a lot of room for growth at the company. I am just starting out, so I am getting my foot in the door.

[my2boyz]

There are programs available for first time home buyers with no money down...it might not hurt to see if you qualify for one.

[Erin]

Originally Posted by StewiesMom

Yes, I found it. thanks. I've been stalking Dena on YT chat, too. I want to ask her some questions since she went in that direction.

The property in Chicago (city PROPER, I can't speak for any of the suburbs) is steadily appreciating. My friend makes 35k per year and she got preapproved for a mortgage of 250k. Obviously, she can't afford to pay that much, so its important to figure out how much you can afford monthly before you buy. I think that the mistake that a lot of people make are just looking for houses for whatever price they get preapproved for, then they go over their heads and can't ultimately make the monthly payment. Its really scary to think about!

This was going to be my warning, but you already know this, so that's good! I'm in the far west suburbs and our values are FLAT and so is the market. Lenders will approve you because they know you will pay the mortgage first, before you will eat or put gas in your car.

Chicago prices ARE going up, but they aren't going to continue to rise as quickly as they have been because they are reaching the ceiling of having enough people able to afford them. Only a small number of people are willing and able to pay $500,000 for a small 2 bedroom condo, so at some point the values will stop going up.

Also keep in mind that refinancing involves some costs, usually $1000-$4000. No closing cost re-fi's only roll that into your loan, they don't really waive the charges. So keep that in mind. You also need to figure in taxes. My 2 bedroom townhome's mortgage is $1000 a month, but with taxes it's over $1400. Then our HOA is another $100/mo. We were paying $950/mo for a 2 bedroom apartment nearby when we chose to "stop throwing money away" We don't regret it and we love our house, but we also sat on the floor for a year because we couldn't afford furniture.

You can always get the interest only loan and then pay extra to principal. I generally believe the interest only is BAD but I understand how expensive housing in Chicago is and I can sympathize. They say you are supposed to spend less than 2 times your annual income on your house. We are so far west that we border corn fields and we bought a small basic townhouse and it's still 3 times our income. I can't imagine trying to live in the city.

[yorkiegirl83]

We just bought a home in Dec w/no money down, but we got a great interest rate and the timing was right for us. We actually had the down payment money but wanted to save it for home repairs/emergencies. So when all the closing fees got rolled in, about 13,000 dollars worth.. the price of our home definitely went up dramatically.

I was paying 600/mo in rent and thought the same thing as you.. why rent when I can buy for nearly the same? But it is more $$. There's home owners insurance, taxes, emergency funds for repairs, ect.

I wouldn't trade it, but I'm paying double what I did then so it's been an adjustment that's for sure =)

[celstu1]

Originally Posted by StewiesMom

I know its popular now and its risky, but does anyone have one? I am thinking about getting one temporarily and then re-finance a year or so down the road.

The real estate market is still hot here, so I know that anything I buy will appreciate in value, so that part isn't scary.

What do ya'll think?

I had to get a 5 year ARM interest only mortgage. Im a year and a half into it almost. I think if you think you are going to be in your house forever, don't do it, but if you think that you will not be there more than 5 years, then do it. You do not pay enough principal in the first 5 years to make a huge dent in your owed amount anyways. Just don't do a deferred interest mortgage. That is where you dont even pay the whole intereste every month and at the end of the time frame (5 years maybe) the interest you didnt pay gets back loaded onto the loan so you OWE more than you paid! that is not the greatest idea. but an interest only loan, well I dont think its too bad for at least 5 years, probably not for longer than that though!