Anyone have an interest only loan on your house/condo?

[robfantasy]

what are your thoughts on this type of loan?

i want to buy a 300k property pay interest only, use the tax write offs for my business while i generate more cash and then sell the place in 3 years where hopefully it has appreciated.


anyone else doing this?

[After Shock Media]

Fuck no.

(bump since property threads are kind of liked around here)

[dig420]

Nope. You're at the mercy of a variable interest rate and you never get equity until you pay the loan down. I suppose if you're a professional real estate guy there are uses for it, but it's not for the first time or casual investor, the dangers are much greater than the benefits.

[robfantasy]

what if u are just looking to sell in 1-3 years and u want to keep your cash flow

[gdog]

I am doing it right now with my place, I am dumping it in 3 years anyways so why pay into the equity since it is appreciating a little each month still. My original loan back in the day when I bought in 2000 was around 2800 per month, now I have taken out 200k in equity and there is still another 100k in it. My payment now is only 2000 per month interest only for 5 years.

[robfantasy]

Originally Posted by gdog

I am doing it right now with my place, I am dumping it in 3 years anyways so why pay into the equity since it is appreciating a little each month still. My original loan back in the day when I bought in 2000 was around 2800 per month, now I have taken out 200k in equity and there is still another 100k in it. My payment now is only 2000 per month interest only for 5 years.

gdog how much was it and how much is it worth now

[tony286]

Very scary stuff

[gdog]

Turned 300k into 600k in 5 years.

[DatingGold]

If the market goes down.. you are royally fucked. and the bank doesnt care.

[Sarah - GTS]

In my opinion Interest only Mortgages are very risky, as you are betting that the value of the property will appreciate. What if the market drops? If you finance the majority of the property with an Interest only mortgage and the value drops you either have to hold onto the property or lose you shirt when you sell.

We do use some Interest only Mortgages, but they are short term second mortgages for small amounts (i.e. 10% of value), with very open clauses to make lump sum payments against the principal. Of course these are all rental properties, so we are investing in the income of the property vs. the appreciation and resale of the property.

[Linkster]

Sarah - thats the best way to use these loans
I just took another one as a second mortgage to pay off other high interest stuff - if you have a good rating (point score high) you can get them as low as a point or so over prime. If you have a higher interest rate on something else this definitely saves money - but only if you can pay it off quickly.

If youre in the US, I dont think you have to worry about the rates dropping anytime soon - but if you can get it - you should at least cover your ass and get one that follows the prime rate

[SinisterStudios]

That is very risky in the current real estate market, there is a nice buble forming and no one knows if it will burst or not. It seems to be a huge risk, imo

[adis55]

Originally Posted by Sarah - GTS

In my opinion Interest only Mortgages are very risky, as you are betting that the value of the property will appreciate. What if the market drops? If you finance the majority of the property with an Interest only mortgage and the value drops you either have to hold onto the property or lose you shirt when you sell.

We do use some Interest only Mortgages, but they are short term second mortgages for small amounts (i.e. 10% of value), with very open clauses to make lump sum payments against the principal. Of course these are all rental properties, so we are investing in the income of the property vs. the appreciation and resale of the property.

Have you ever actually heard of a property dropping in price in the last 10 years? ..maybe in Idaho or something...

Interest only is the only way to go if u are selling within 1-3 year.
if you get 30yr fixed, all you will do is pre-pay interest anyway during those first 3 years, so why pay a higher rate. just look at the "amortization schedules" for both loans and you ll see it why is it better.
3/1 I/O is 4.875% right now
30yr fixed is 5.5% (Princip./Interest)

anyway,

sarah you dont know what u talking about.
if somebody needs a loan or have any questions , feel free to check out www.libmort.com or contact me [email protected]

later

[psili]

I had a 80% ARM and a 20% HELOC (interest only) for the first 2 years and the interest only loan never diminished in principle, even if I overpayed. I consolidated both to get out of the HELOC and even after a couple of months, it's a joy seeing the principle go down.

Don't do a heloc if you don't have to. They're pretty shitty.

[woj]

Originally Posted by robfantasy

..where hopefully it has appreciated.

If it doesn't appraciate, you are fucked, and it keep in mind that it needs to appraciate about 10% for you to come out even.

[Peaches]

No! Also put down at least 20% so you don't pay PMI.

I took an HELOC out immediately so I'd have access to the downpayment but if you don't use it, it doesn't cost anything. It's my "dire emergency" fund ;)
'

[Peaches]

Originally Posted by adis55

Have you ever actually heard of a property dropping in price in the last 10 years? ..maybe in Idaho or something...r

Ever heard of Houston? Dallas? Northern New Jersey? I've seen lots of property in those areas drop like stones in value.

[sperbonzo]

Originally Posted by robfantasy

what are your thoughts on this type of loan?

i want to buy a 300k property pay interest only, use the tax write offs for my business while i generate more cash and then sell the place in 3 years where hopefully it has appreciated.


anyone else doing this?

Where is the property located? If you are in Florida, I can help you out with this. I also have a mortgage brokerage.

[sperbonzo]

You may want to consider an option arm. This is a loan that will give you the choice of four different payments each month.

You can pay a negative amortized payment of about 2%
or You can pay an interest only payment
or You can make a payment as if it is a 30 year fixed
or you can make a payment as if it is a 15 year fixed

Give me a call if you get a chance 954 650 5789

[adis55]

Originally Posted by Peaches

Ever heard of Houston? Dallas? Northern New Jersey? I've seen lots of property in those areas drop like stones in value.

drop like stones, when? in stone age?

i ve been listenting idiots talk about "real estate bubble" for 3 years already.
the growth might slow down, but the actual property value will not go down

Florida will not slow down at all due to 30K people per month moving into the state
here, read this
http://msnbc.msn.com/id/7558576/

[adis55]

Originally Posted by sperbonzo

You may want to consider an option arm. This is a loan that will give you the choice of four different payments each month.

You can pay a negative amortized payment of about 2%
or You can pay an interest only payment
or You can make a payment as if it is a 30 year fixed
or you can make a payment as if it is a 15 year fixed

Give me a call if you get a chance 954 650 5789

what index is that 2% deal? what margin?
I have MTA loan available at .95% (under 1%)
2% neg am rate sux for that type of program

[sperbonzo]

Originally Posted by adis55

what index is that 2% deal? what margin?
I have MTA loan available at .95% (under 1%)
2% neg am rate sux for that type of program

I was quoting high since I don't know what his credit is, what his LTV would be, and whether or not he can go full doc or only stated. OBVIOUSLY it can get much better than that, but I have seen quite a few people in this biz that can't show income and have to go stated on loans. I'd rather give him GOOD news depending on circumstances rather than worse news as the process moves on