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Interest-Only Mortgages Are a Bad Deal

Here's how it works: Say a home buyer opts for an interest-only loan at 1.5 percent. On a 30-year loan of $100,000, the buyer would owe $125.00 in interest at the time of his first payment. But say the "real" interest rate is more like 6 percent, or $500.00 at the time of the first payment. The difference, or $375.00, would be tacked on to the principal of the loan, so that in a month the balance of the loan would be $100,375.00!

Interest-only loans never get paid off - at least not by making the scheduled monthly payments. Many of them are combined with balloon payments which are either paid off or converted to a more traditional mortgage at a later date.


no middlemen mortgage lenders
http://benchmarklending-mortgage.blogspot.com/

Comments

  • Ian_W
    Ian_W Posts: 3,778 Forumite
    Part of the Furniture 1,000 Posts Photogenic
    :spam: :spam: :spam: :spam: = Reported.
  • Woby_Tide
    Woby_Tide Posts: 5,344 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    interest only loans never get paid off!

    Ladies and gentlemen, Sherlock Holmes has entered the arena.....
  • dunstonh
    dunstonh Posts: 120,028 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I know you lot enjoy a good whinge about brokers in this country but look at the crap you get in the US and realise that its not all bad over here.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • An interest-only mortgage is enticing; the low monthly payments make it possible for people to buy a home who otherwise could not afford one, and it allows people to buy bigger and better homes than they could with a conventional mortgage.

    But the reality is that with the real estate boom slowing down, the interest-only loan isn't the great opportunity is seems to be; it's actually a big, expensive, messy time bomb, waiting to explode.


    http://benchmarklending-mortgage.blogspot.com/
  • poopscoop
    poopscoop Posts: 315 Forumite
    Part of the Furniture Combo Breaker
    Woby_Tide wrote:
    interest only loans never get paid off!

    Ladies and gentlemen, Sherlock Holmes has entered the arena.....

    Someone give him a Blue Peter badge :rotfl:
  • Woby_Tide
    Woby_Tide Posts: 5,344 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    rg1570 wrote:
    An interest-only mortgage is enticing; the low monthly payments make it possible for people to buy a home who otherwise could not afford one, and it allows people to buy bigger and better homes than they could with a conventional mortgage.

    But the reality is that with the real estate boom slowing down, the interest-only loan isn't the great opportunity is seems to be; it's actually a big, expensive, messy time bomb, waiting to explode.


    http://numpty-mortgage.blogspot.com/

    Does your manager know what a complete numpty he has in charge of his spamming operation? Theres only one thing worse than a spammer and that's a clueless spammer wasting time spamming the wrong country


    Maybe todays blog could be

    "Spammed the wrong country, how much of a muppet do I feel. Had a burger to make myself feel better. Spammed the right country in the afternoon. I think I may get a bonus soon. Go team!"
  • meanmachine_2
    meanmachine_2 Posts: 2,624 Forumite
    Part of the Furniture Combo Breaker
    If you think American IO deals are bad, I have a friend, who signed up to a 1.8% IO mortgage, and is now locked onto the bank's SVR for...FIVE YEARS.

    The ERC? Oh, a mere 8% of the original loan.

    No, I couldn't believe it either.

    By the way, on an unrelated note, was watching an old episode of Ellen yesterday (no, don't know why), and apparently she has a 30 year fix @ 7.1%.

    Pricey.

    Fancy tying in for that long. Those crazy yanks.
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