When is an interest only mortgage a good idea?

Risk?? Not really.. I/O loans are out there still, and people use them every day.. The benefit is lower monthly payments, and in a appreciating market, it's a great option.. Especially if you intend on staying in your home for 3 to 5 years, since your principal reduction for the first 5 years of a new mortgage is minimal.. You will still have equity, again, assuming your purchasing in an appreciating market.. if the market is declining, then it could hurt you, since your principal will always be what you started with on day one.. and if your property declines in value, you could be trapped in the home until the market recovers or be faced with having to do a short sale or, worse, come out of pocket thousands to sell the home if you find it necessary... Keep in mind that in the last 30 years, we've had 5 to 6 years of declining market, with the last 5 years being the worst this country has ever seen.. Could it happen again?? Possibly, but unlikely.. For this reason, I say that I/O loans are not necessarily risky. Also consider a $150K loan I/O vs. Fully Amortized.. Your Interest only payment at 4.25% is $531 per month vs $717 fully amortized... in 5 years I/O you paid $186 less per month X 60 months =$11,160 in payment savings. Your Fully Amortized loan balance after 5 years would be $136,000 or $14,000 less.. By going interest only cost you less than $3000... If that monthly savings money was placed into an investment making more than 4.25%, you actually come out ahead.. Again, not necessarily risky!! . . I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Short term is one reason it may be a good idea.

Intrest only loans are great when property value is going to be going up and you will not be keeping the home for a long period of time. Another reason for intrest only is for a self employeed client who needs to keep as much of their money liquid for use somewhere else. www. HOMEMORTGAGEXPERT.com PETER SAVINO 855 411 LEND call me if you need more information

There are many different ways to answer this question. Are you looking at it for a refinance or a purchase? How long do you plan on owning the property? Is this a private note someone is offering you? Most people love the initial payment structure of an interest only loan but there are risk that need to be considered. To help you I need to know more information about your specific case. This would go a long way in giving you a detailed explanation of why or why not it's such a good idea. If you would like to contact me with for a no obligation phone call to discuss what you have in mind, please contact me at 623-432-1309 and ask for Mike.

If you need low payments for the first 3 to 10 years of the life of the loan, after which you will sell the property; or your income and expenses will change, so that you can afford much higher payments (could be double, or even more), interest only payments may be a good choice.

I really like the interest only option because it is only the minimum payment that is lower. You can always pay down principle whenever you like, so these loans are really good for commissioned or self employed employees who have income that fluctuates from month to month. The interest only feature gives them a really low required payment for the months to which they make less money. On the other months, they can just make extra principle payments.

In today's market it's not beneficial, unless it is a line of credit on revolving terms. The higher interest rate premiums washes out the benefit on paying higher interest. See our mortgage calculators on our site for a better understanding. Good luck!