WTF is an Interest Only Mortgage - Democratic Underground

KitchenWitch

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Wed Feb-23-05 12:47 AM
Original message

WTF is an Interest Only Mortgage

is this a scam to keep people paying forever?

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alittlelark

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Wed Feb-23-05 12:50 AM
Response to Original message

1. Yes...

If all you ever pay is interest, you will never pay off the principle. I am amazed that they are legal.

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Dave Reynolds

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Wed Feb-23-05 12:50 AM
Response to Original message

2. My opinion is

that it is good for people who want more house than they can afford, hoping to sell the house for a profit later on.

Would suck bad to be stuck with one that won't sell.

That's the same kind of loan my in-laws had to sell motor homes, they only paid interest on their inventory.

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HamstersFromHell

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Wed Feb-23-05 01:04 AM
Response to Reply #2

8. In the motor vehicle trades, that's called "floor planning".

Almost every vehicle dealership does this...very common.

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rwheeler31

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Wed Feb-23-05 12:53 AM
Response to Original message

3. Predatory lending

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KitchenWitch

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Wed Feb-23-05 12:55 AM
Response to Reply #3

6. That is what I thought

I can't believe it is legal. Oh wait, yes I can, because it takes advantage of all those that are not 2 %ers (as in the 2 % who benefited most from the * tax cuts).

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serryjw

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Wed Feb-23-05 12:54 AM
Response to Original message

4. Used mostly on SUPER JUMBO mortgages

Homes in the millions.I know no one that uses it on mid priced homes.

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Left Is Write

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Wed Feb-23-05 12:54 AM
Response to Original message

5. It can work for some people.

My sister has one. They only need to pay the interest every month - and the rate itself was pretty ridiculously low - but they do throw some on the principal also. She gets a fabulous end-of-year bonus at her job, which she then uses a large chunk of to pay down principal.

They did this not because they couldn't afford the house they bought, but because they wanted to take the money from the house they sold and invest it elsewhere.

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rwheeler31

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Wed Feb-23-05 01:02 AM
Response to Reply #5

7. This is pushed on middle and low income

people to reduce their debt. Then they loose their homes.

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Left Is Write

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Wed Feb-23-05 01:06 AM
Response to Reply #7

9. That I wouldn't know.

My sister and her husband aren't middle or low income, and I think they went looking for it (as opposed to having it "sold" to them).

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Dr.Phool

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Wed Feb-23-05 01:44 AM
Response to Original message

10. A lot of people use that

In a rapidly appreciating real estate market.

In my area, homes are appreciating at 2-3% PER MONTH!! The interest only mortgage lets you keep monthly payments lower while your property increases in value rapidly,

It only makes sense if you plan to sell the place for a profit in the nest 3-5 years. But, it's risky if the real estate bubble bursts suddenly.

I myself wouldn't do it, unless I was speculating.

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