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ARIELSMOM
Love my Babes
Member since 8/05 5889 total posts
Name:
MEREDITH
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Interest Only mortgages
So- Im a bit nervous.
I was presented with an 80/20 by my mortgage man. The first loan is 30yr fixed, interest only. The second is a 30/15 fixes- P&I.
Please tell me what you think.
Go with it- or no?
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Posted 3/2/06 8:31 AM  |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Interest Only mortgages
Too much money to finance in an unsteady market.
Put more money down. If you don't have more money to put down.... save.
The second mortgage will have a super high interest rate. Also realize that they will amortize the payments for 30 years... but its your responsibility to pay it back in 15.
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| Posted 3/2/06 8:36 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Interest Only mortgages
Oh and I didn't even realize this was an Interest Only loan. Definitely NO.
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| Posted 3/2/06 8:40 AM |
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charon54
My two boys!
Member since 5/05 7279 total posts
Name:
Rebecca
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Re: Interest Only mortgages
You have FM
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| Posted 3/2/06 8:41 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Interest Only mortgages
A good read about IO Loans
An interest-only mortgage might be a good fit for:
someone whose income is mostly in the form of infrequent commissions or bonuses;
someone who expects to earn a lot more in a few years;
someone who truly will invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and who is confident that the investments will make money Investments would have to gain at least 5-6% interest to be worthwhile. Your typical Savings or Checking account is not the answer.
Financial advisers don't recommend interest-only mortgages to regular wage earners who take out moderate-size home loans and don't have a strategy for investing the savings.
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| Posted 3/2/06 8:47 AM |
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Salason
♥
Member since 6/05 9878 total posts
Name:
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Re: Interest Only mortgages
Posted by DjPiLL
Too much money to finance in an unsteady market.
Put more money down. If you don't have more money to put down.... save.
The second mortgage will have a super high interest rate. Also realize that they will amortize the payments for 30 years... but its your responsibility to pay it back in 15.
I echo all of Pill's sentiments. NO NO NO unless you could make the payments at the fully indexed rate AND are willing/able to stay put for a LONG time bc theres a good chance that it will take you a long time to build equity with a slow down in home price appreciation (and it IS already slowing...)
Edited for grammar
Message edited 3/2/2006 8:19:54 PM.
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| Posted 3/2/06 7:47 PM |
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skew
LIF Adult
Member since 5/05 6794 total posts
Name:
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Re: Interest Only mortgages
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definetly a not a good idea for others.
Message edited 3/2/2006 8:03:47 PM.
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| Posted 3/2/06 8:02 PM |
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Salason
♥
Member since 6/05 9878 total posts
Name:
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Re: Interest Only mortgages
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definetly a not a good idea for others.
sorry if it sounded like i think they are bad for all borrowers. i do agree with you that there are certainly people for whom it is appropriate as very well might be the case for you. however, there are also many subprime borrowers who are using them and stretching to afford houses that they otherwise could not.
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| Posted 3/2/06 8:14 PM |
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skew
LIF Adult
Member since 5/05 6794 total posts
Name:
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Re: Interest Only mortgages
Posted by Salason
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definetly a not a good idea for others.
sorry if it sounded like i think they are bad for all borrowers. i do agree with you that there are certainly people for whom it is appropriate as very well might be the case for you. however, there are also many subprime borrowers who are using them and stretching to afford houses that they otherwise could not.
i agree 100%.
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| Posted 3/3/06 9:09 AM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Interest Only mortgages
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definitely a not a good idea for others.
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home? Is your interest rate fixed?
I am not saying this isn't a good mortgage for you but some of your reasonings may be uncertain. Even interest mortgage isn't always deductible...it's only deductible up to your marginal tax rate in your regular calculation and is completely eliminated in an AMT calculation. I am only sharing this to help...I'm not trying to criticize at all.
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| Posted 3/3/06 9:20 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Interest Only mortgages
Posted by shamrock12472
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home?
You can't.
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| Posted 3/3/06 9:53 AM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Interest Only mortgages
Posted by DjPiLL
Posted by shamrock12472
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home?
You can't.
That's my point.
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| Posted 3/3/06 9:57 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Interest Only mortgages
Posted by shamrock12472
Posted by DjPiLL
Posted by shamrock12472
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home?
You can't.
That's my point.
I know. 
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| Posted 3/3/06 10:23 AM |
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skew
LIF Adult
Member since 5/05 6794 total posts
Name:
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Re: Interest Only mortgages
Posted by shamrock12472
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definitely a not a good idea for others.
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home? Is your interest rate fixed?
I am not saying this isn't a good mortgage for you but some of your reasonings may be uncertain. Even interest mortgage isn't always deductible...it's only deductible up to your marginal tax rate in your regular calculation and is completely eliminated in an AMT calculation. I am only sharing this to help...I'm not trying to criticize at all.
i am by no means an investment expert, that's my advisor's job. the only uncertainity in the equation is the home appreication. thanks for the advice though. as mentioned, an IO mortage isn't right for most people of but it IS a great fit for us.
Message edited 3/3/2006 11:42:19 AM.
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| Posted 3/3/06 11:10 AM |
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Salason
♥
Member since 6/05 9878 total posts
Name:
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Re: Interest Only mortgages
Posted by shamrock12472
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definitely a not a good idea for others.
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home? Is your interest rate fixed?
I am not saying this isn't a good mortgage for you but some of your reasonings may be uncertain. Even interest mortgage isn't always deductible...it's only deductible up to your marginal tax rate in your regular calculation and is completely eliminated in an AMT calculation. I am only sharing this to help...I'm not trying to criticize at all.
Mortgage interest actually is deductible in the AMT calc as is charitable contributions. Just met with the accountant last week who told me these are my only options for reducing it.
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| Posted 3/3/06 6:17 PM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Interest Only mortgages
Posted by Salason
Posted by shamrock12472
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definitely a not a good idea for others.
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home? Is your interest rate fixed?
I am not saying this isn't a good mortgage for you but some of your reasonings may be uncertain. Even interest mortgage isn't always deductible...it's only deductible up to your marginal tax rate in your regular calculation and is completely eliminated in an AMT calculation. I am only sharing this to help...I'm not trying to criticize at all.
Mortgage interest actually is deductible in the AMT calc as is charitable contributions. Just met with the accountant last week who told me these are my only options for reducing it.
It depends what the indebtedness is for. Acquistition indebtedness does have some more favorable tax treatment under AMT as opposed to home equity indebtedness.
I was trying to be helpful.
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| Posted 3/3/06 7:43 PM |
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Salason
♥
Member since 6/05 9878 total posts
Name:
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Re: Interest Only mortgages
Posted by shamrock12472
Posted by Salason
Posted by shamrock12472
Posted by skew
i have an IO mortgage and perfectly content w/ it. the thought process was that the house will "most likely" appreciate on its own, so instead of dumping money into the equity, invest the money at an equal or higher rate of return. in addition to earning interest on the investment, and the benefits of appreciation, you can also deduct the mortgage interest on your taxes.
DJ and i have been down this road before and we both concluded that although it may be a beneficial mortgage for some, it is definitely a not a good idea for others.
I was just wondering....How can you guarantee an investment will have a return that is an equal or higher rate then the mortgage interest? How can you be sure your investment won't lose value? How can you guarantee that you will have continued appreciation on your home? Is your interest rate fixed?
I am not saying this isn't a good mortgage for you but some of your reasonings may be uncertain. Even interest mortgage isn't always deductible...it's only deductible up to your marginal tax rate in your regular calculation and is completely eliminated in an AMT calculation. I am only sharing this to help...I'm not trying to criticize at all.
Mortgage interest actually is deductible in the AMT calc as is charitable contributions. Just met with the accountant last week who told me these are my only options for reducing it.
It depends what the indebtedness is for. Acquistition indebtedness does have some more favorable tax treatment under AMT as opposed to home equity indebtedness.
I was trying to be helpful.
so was i 
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| Posted 3/4/06 12:04 PM |
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