yes and no. if you are doing an interest only loan then yes. if you are doing a 30 year loan then what you said fits. for most 15 year loans it's not true.

so i depends. we're only making 1 payment but pay about $100 more towards the principle. we try to do a lump sum payment at the end of every year. that's the only way you can pay it off faster.

we refinanced 1.5years ago which reset out 15year pay off clock. right now if we continue at our current pace, we will be done in 8.5years. I plan on paying it off much sooner.

 

I don't know how long I'll have it. I'll odviously have it for 2 years so I don't have to pay penalties. I'd like to say I'll keep it for a long time, but who know. I'm going to be putting down $10-15k for a downpaymen, and I'm looking at condos in the $80-115K range. with a 30year fixed I'd be looking at $400-1000/month including insurance.

 

I wouldn't put that much money down on that amount of a loan. At 5.5% your monthly P&I would be around 455 a month for 80K and about 655 for 115K depending on what your taxes and insurance are if you want to escrow them also they would be in addition to that base payment.
Keep your money for your own use or invest it in something other than your home. You may want it to remodel to your tastes, even on a new home.

 

But if proprety values take a dump, you could get hit, potentially very hard, on an interest only loan. I think they are a scam by the banking and real estate industries to spur sales.

 

This really only works in areas such as San Fran and socal, and other areas where real estate is artificially high...but as I haven't read any of the other posts, I'm sure thats been covered h:

 

Yeah, this boom is extremely sick. It is a shame that people are leveraging themselves so much trying to get the "bigger house". The problem is that the yield curve is flattening which has continued to drive this housing boom. It absolutely cannot last forever, and when there is a big sell off, it is going to drastically hurt those who are doing these interest only loans. However, if someone used one of these loans to build equity in a house and sold it and then moved on to a traditional mortgage, that would be different. However, they move to a bigger house on another interest only loan.

My bank does not deal in interest only loans.

 

This is the way I saw it when we were debating: We only are required to pay XXX amount monthly which equals only the interest (obviously). We have a set interest rate for 7 years, after that, we get a new rate every 5 years and it is capped at a certain percent (can't think of it off the top of my head). Either way, if you ONLY pay the interest and move before you pay the principle at all, you get NO equity, however, you can pay on the principle at any time. So what we're doing is paying the entire interest payment each month PLUS putting extra $ towards the principle, that way we obtain equity but we have the option of how much we want to go towards our principle. I like it but thats just me :dunno:

 

Im considering one but Ive always been sceptical about them. Entry level "cheap" homes in my area are going for 350-400k. How the hell are normal people just starting out supposed to able to afford that?

 

really? I've heard that you should put down as much as you can afford right off the bat. when I got to a bank to get pre-qualified I'm going to discuss my options with them. since I'm moving to AZ I'm starting to think that I should start off with a short term lease(3months), and then buy after I get the lay of the land. that would also allow me to build up some more money till I buy. good point about the remodeling, I'm sure I'm going to want to upgrade certian things once I move in. a kegorator is high on my list.



exactly, thats why I'm moving to AZ where a normal person can afford a house. well at least for now, AZ is one of the hottest housing markets in the country.

 

its crazy that in socal.. even homes in the middle of nowhere/desert are $500-600k+