Intrest only Mortgages?
 

Any guys who do mortgages here know what percent of them are intrest only these days?

I read it recently somewhere 25% or more I think

Wow, people really are stupid, arent they? Why dont they just rent if they are going to pay intrest only? Same thing.

If the house appreciates at a higher rate than the interest you pay on it, you are making money with it.

Welcome to 1929.

Most of them are gambling. They believe the market value of the property will grow fast enough to make a quick turnover possible, without having any real equity.

There are idiots who think they'll get more house that way.. some of them even do an interest only with an ARM..

I wouldn't do a interest loan. fuck that

mortgages remind me of my all-time favorite board game that is, monopoly!

Interest only puts your name on the title. You are the legal owner, subject to the mortgage caveat of course. Compare that to playing by a landlord's rules...

too scary for my blood

Not so much. My little house in Arizona cost me $220k in November of 2002. I'm about to sell the house because I'm moving back to California, and we are putting it up for sale for $450k. Even if I had an interest only loan, I'd still make some serious bank.

Also, think about this, for the first 15 years of your mortgage consider that interest only b/c you are paying about 85% towards interest.

So on an interest only loan you're forking out PMI, right? Money thrown away right there.

Interest = BIG Tax right Off + Appreciation = Great Deal

But that's only if you get a house you can afford. Buying a house where you can only afford the I/O payment is stupidity, but I'll be thanking them next year when we buy their house off the block for 75% it's value.

PMI is only for loans over 80% the value of a home. Most people do combo loans or specialty loans with lender paid MI. In the last year out of 4.5 Billion in residential mortgages we did only about 2-3% had PMI and that was usually because the LTV was about 80-85% and they would be paying it down and dropping the PMI.

But yes, PMI is a waste of money, no tax deduction, etc.

$600,000 x 7.4% (interest only people usually don't have good credit) = $44,400

$44,400 / 12 = $3700 per month.

$3700 per month = no thanks...


Even if you make a $1000 over payment... total $4700 per month, you only change the next months rent to $3693.83... Which means next month you saved a whopping $6.17 by making that over payment.

Wow... Sounds like a good idea to me...

Make a $10,000 over payment... $3638.33 or $61.67 savings per month... Nice but it will be a while before those add up to match the $10,000 over payment... Like 13 years later... Of course continuing these payments will make a dramatic impact.... But if you can afford to make these payments, you can also afford to say $120,000 over the course of a year and use it as a down which would leave you with a $2960 mortgage interest per month.

Very few areas are doing that and even those are slowing down. If you have a 30 year mortage or even 15 years, I can tell you that there is no way your house is appeciating that much over that long a time. Pure insanity. It's like retards that just pay the minimum payment on their credit cards. If anything people should actually be paying MORE than what their actual payment is so they end up paying less interest

Oh duh - I blonded out and forgot people can get interest only loans with more than a $0 downpayment. Wasn't thinking on that one........:helpme

Most subprime (Bad Credit) mortgage lenders have actually reduced the availability of interest only loans because the default rate expected within the next 3-5 years has grown exponentially. New Century one of the top 3 Subprime lenders just recently brought I/O loan back. Right now the only people that are typically doing Interest Only loans are 660+ FICOs which is really B+ to A+ paper. This is only due to the lower loan amounts of high value properties and their ability to get better returns elsewhere, or for example, being self-employed and using there cash-flow to grow their business.

1. San Diego 47.6%
2. Atlanta 45.5%
3. San Francisco 45.3%
4. Denver 43.4%
5. Oakland, Calif. 43.1%
6. San Jose, Calif. 41.1%
7. Phoenix-Mesa 38.3%
8. Seattle-Bellevue-Everett 37.2%
9. Orange County, Calif. 37.0%
10. Ventura, Calif. 35.3%
11. Sacramento 34.9%
12. Las Vegas 33.7%
13. Stockton-Lodi, Calif. 32%
14. Washington, D.C. 31.4%
15. Charlotte, N.C. 29.1%
16. West Palm Beach-Boca Raton, Fla. 28%
17. Portland, Ore. 27.8%
18. Los Angeles 26.7%
19. Salt Lake City 25.6%
20. Riverside-San Bernardino, Calif. 25.5%
21. Minneapolis-St. Paul 24.2%
22. Orlando 23.3%
23. Columbus, Ohio 23.2%
24. Fort Lauderdale, Fla. 23.0%
National 22.9%
25. Jacksonville, Fla. 22.8%
26. Norfolk, Va. 21.5%
27. Tampa-St. Petersburg, Fla. 20.2%
28. Baltimore 19.2%
29. Detroit 17.5%
30. Boston 17.2%
31. Cleveland 15.8%
32. Fresno, Calif. 15%
33. Bakersfield, Calif. 14.4%
34. Monmouth, N.J. 14.3%
35. Miami 14.3%
36. Austin, Texas 13.6%
37. Dallas 13.4%
38. Newark, N.J. 13.0%
39. Chicago 12.2%
40. New York 11.6%
41. Philadelphia 10.0%
42. Kansas City 9.9%
43. Nassau-Suffolk, N.Y. 9.8%
44. Fort Worth, Texas 9.4%
45. St. Louis 7.9%
46. Providence, Md. 7.4%
47. Indianapolis 6.9%
48. Houston 6.4%
49. Pittsburgh 5.7%
50. Milwaukee, Wis. 4.8%

Best thing you can do....
Take out an interest-only mortgage...
Then take the amount that you WOULD be paying on the principal each month, and pay it into an account that's used to invest where you earn a good interest rate.
When you're paying principal to the mortgage company, you're taking money and handing it to someone who will not be paying you anything in return for it.
I don't have the numbers in front of me so I don't remember the exact time frame, but at a decent interest rate, your "principal" invested elsewhere will accumulate enough (with compounding) to pay off your entire mortgage in the area of 15-18 years or so.
You can thank me then. :thumbsup

wow, lots of people will be fucked soon :(

That sounds great in theory, but the truth is you can't cheat the system. The only reason you may come up ahead with this strategy is because you take on more risk. It's a great strategy if your investements work out, and your house appreciates, but if things don't work out, in 10 years you could be left without a penny to your name....

i wouldn't do it these days, maybe it was cool a few years ago.

not necessarily - if you take the money and invest it in CDs or other quality investments paying around 5%, you're not really taking on more risk - you're just earning 5% compounded, on money that would be held by the mortgage company paying you zero. worst comes to worst (and i'm not talking about if you have an interest-only mortgage that comes due every 6 months because then you *could* get screwed if we see a repeat of the 70s - my interest rate is fixed for ten years before it can change), you're slightly ahead of even - you can take the money at any time and hand it to the mortgage company, if you're so inclined.

hmm, so you get 5% with a cd, but have to pay 6.5% for the interest only mortgage, how exactly are you coming out ahead?

people want bigger houses than they can afford

He still has to pay income tax on that 5%

And 99.999% of people are not diciplined enough to do this.

Maybe things are different up your way, but around here any EXTRA funds you put into your mortgage account result in a savings on your monthly interest bill. It's also effectively tax free since it's a discount on what you owe, rather than income earned. That means if you pay 5% on your mortgage and 50% in income tax, every extra dollar sitting in your account saves you the same as an investment paying 10% after tax.

Here's more info on the concept...

http://www.fyibox.com/for-your-infor...free-interest/

Every seems to be talking about leveraging. It takes discipline so you don't rack up credit cards bills at the same time, but historically Real Estate is the only virtually "100%" safe investment. But you sometimes have to be patient. People who lose their shirt in real estate either wanted out at the wrong time or got themselves into bad situations through lack of discipline. Real Estate always go up, bad neighborhoods get clean, good neighborhoods go bad, but land always goes up.

Where did you find this list?

search google for: internet only mortgage settlement shortfall

overpaying your mortgage (not interest only) and paying off your mortgage early saves you thousands, even tens of thousands and I'm sure is a much better use of money than investments. search for early repayment mortgage calculator to get an idea of how much you'll save

Exactly! That's what we are hoping for! We actually bought and sold our house just south of Tucson in a very booming area .... We made a nice little chunk of change. We DID NOT do the interest only option, we had a 30 year mortgage. Let me make that clear from the get go ... What I am banking on is two things:
1. The housing market to collapse
2. The interest only loans to bottom out

Why? I'll get a smoking house at a killer deal! I know a bunch of people that are already getting forclosures WAAAAAYYYYY below market value.

Those interest only loans are scary. I saw a special on 60 Minutes where a guy in CA bought a 800 sq. fixer upper for $600k on interest only and *hoped* to sell it for over a million when he was done with it. Now, if he can't sell, he's boned....pending interest rates continue to increase and he can't make his mortgage.

What many do is the 80/20 split to avoid the PMI and cap the interest. I'm not sure how it all exactly works cause like I said, I stayed as far from it as I possibly could.

Wouldnt touch one to save my life.

Any extra money I have to pay off my mortgage I'm putting towards buying other real estate. Around here, prices aren't going up like crazy, but they ARE steady.

Like avalanche said though, it's not fast money. I don't expect to resell what I would buy this year for at least 4-5 years (land, not homes).

i dont see Compton at that list :)

lol compton should be on it soul rebel

What other loans are out there that are more secure?

cash upfront purchases,no loans needed hehe

Intresting Atlanta is #2 on that list considering homes are pretty cheap to buy there already

Scary isn't it?

:helpme

In Atlanta proper (the actual city) they're not cheap. In the suburbs, yes. And it's always hard to tell what they've included when they say "Atlanta".

Depending on how long you plan to live in a house. 5, 10, 15, 20, and 30 year fixed rate mortgages.

As for PMI, there are ways that you can purchase your own PMI and roll it into the mortgage itself without having enough down to qualify not having it. This makes the PMI tax deductable and saves you money in the long run.

Very good point, but we (my company) has a lot of LPMI, Lender Paid Mortgage Insurance, programs where you roll it into the rate and it usually is about a .375% - .625% hit depending on your LTV, loan to value. The catch is though, that PMI can be removed when you pay down you loan, but your rate will only adjust through a refinance. Get a small 2nd and only pay the higher interest on the 2nd and not the lump sum.

IO loans makes sense in NY and San Francisco where property is usually kept for less than 5 years and property value appreciates dramatically in that time. Waaay faster than the national average.

IO loans are fine, and definitly the most tax effective. Since the payment is all interest, and fully deductible.