Ok, after doing some researching on mortgage loans I have decided to go with this loan type. I expect my new home to increase in value over the next 5 years (doesn't everyone?). The down side is a hefty down payment (5% of loan value) and the home may not increase in value and I lose my bra. What do you think Creditnetters? The particulars: Home value $180,000 Down payment: $9000 monthly mortgage payments: $825 based on 5.5% interest rate no PMI at the end of 5 years the rate becomes fixed at 1% above current rate for 25 years 80/20 interest-only mortgage is also an option
With rates at such a historical low, may I ask why you are contemplating an interest only, and waiting 5 years to lock in?
Because I don't plan to stay in that house longer than 5 years. So it's a great deal for me. Also payments of $800+ a month vs $1400+ a month was a huge factor in my decision.
OIC. If you are saving money back every month and aren't stretched by the $800 like some new homeowners are , and you have a back up if homes do depreciate...
I say go with the interest only and caugh up the down payment. If home values do rise you will be getting your down back and then some. I would suggest investing the difference that you will be saving and making it that much more of a score.
SoParkDiva, I am currently going with an interest only loan (I close Thursday). I know many people that have done this, even a few mortgage pfofessionals. For example one person purchased his home for 280K 4 years ago with an interest only loan. We sold it recently for close to 500K. With my loan I will be paying very close to what my current rent is. I'm also buying the house in a very up and comming neighborhood. Similar houses in neighborhoods close to mine have gone up 30-50% in value over the last few years. I don't anticipate that much return on my investment, but I would be happy with a 10% increase when I sell it in 2-3 years. EdG
Re: Re: Interest-only mortgage loans That sounds like a great plan. The average appreciation of homes in this area is about 5% a year. So i should do well. Interest-only loans make sense because even if you bought the home with a conventional 30-year loan - you'd still be paying just the interest to start off with.
