Interest-Only Loan?

[CityGrl]

Can someone explain to me the specifics of an interest-only loan?

Can you have an interest-only loan and also do 100% financing?

 

[pixiegirl]

Can someone explain to me the specific of an interest-only loan?

Can you have an interest-only loan and also do 100% financing?

You get a first and second mortgage. So it's actually 2 loans. You pay interest only for the first (x) years then it switches over to interest plus principal for the remainder of the term.

 

[K_Jo]

You get a first and second mortgage. So it's actually 2 loans. You pay interest only for the first (x) years then it switches over to interest plus principal for the remainder of the term.

Can you do that to pay for your boobs?

 

[CityGrl]

Can you do that to pay for your boobs?

hnoshedidn't:

 

[K_Jo]

hnoshedidn't:

Well I can't call her a whore anymore 'cause that's me!

 

[itsbob]

Can someone explain to me the specifics of an interest-only loan?

Can you have an interest-only loan and also do 100% financing?

Not only can you do an interest only 100% loan, but you can also do an adjustable Rate interest only loan.

The hope is by the time your interest adjusts(usally two years), your house will be worth enough to do a fixed rate conventional loan on both of the original loans.
If you get an 80/20 on a 200K loan, in two years you hope it would be worth 240K, you can re-fi for an 80% of value loan, fixed rate conventional, at a lesser rate, and start to pay Principal and Interest, probably for less a month then you were paying for the interest only ARM.

 

[K_Jo]

Not only can you do an interest only 100% loan, but you can also do an adjustable Rate interest only loan.

The hope is by the time your interest adjusts(usally two years), your house will be worth enough to do a fixed rate conventional loan on both of the original loans.
If you get an 80/20 on a 200K loan, in two years you hope it would be worth 240K, you can re-fi for an 80% of value loan, fixed rate conventional, at a lesser rate, and start to pay Principal and Interest, probably for less a month then you were paying for the interest only ARM.

 

[itsbob]

Interest only is a gamble that the market will continue to rise, and in interest only ARM is a HUGE gamble. If the market stalls or faulters, you won't be able to re-finance, and will get stuck when the adjustment comes for a HUGE monthly payment increase.

 

[itsbob]

I'm betting it's going to keep on the rise, I just bought my house last December using an 80/20 interest only ARM. I hope to refinance in less then a year (hopefully in June or July)

 

[2ndAmendment]

Yeah, but there is a lot of sentiment that the housing/real estate market is about to take a dive, so you could wind up owning a lot more than the house is worth.

 

[pixiegirl]

Can you do that to pay for your boobs?

Unfortunately no. But the tax man took care of that for me.

 

[K_Jo]

Unfortunately no. But the tax man took care of that for me.

Sweet! When do we get to see them? Before and after, please.

 

[itsbob]

Yeah, but there is a lot of sentiment that the housing/real estate market is about to take a dive, so you could wind up owning a lot more than the house is worth.

Possible, but doubtful.. we still have an influx of people in the higher paybands inbound to our area (JSF) and after the BRAC, I think there will still be more. I think locally our market is secure. Heck, we're still only half the cost of the DC market, and the Yuppies will continue to move here and commute.

 

[2ndAmendment]

Possible, but doubtful.. we still have an influx of people in the higher paybands inbound to our area (JSF) and after the BRAC, I think there will still be more. I think locally our market is secure. Heck, we're still only half the cost of the DC market, and the Yuppies will continue to move here and commute.

I have read that the market that was booming in southern PA is tanking; lots of bankruptcies. I think it is a very big risk.

 

[itsbob]

I have read that the market that was booming in southern PA is tanking; lots of bankruptcies. I think it is a very big risk.

Risk is what makes life exciting.. and of course that was PA.. Big difference between Southern PA and Southern MD..

 

[2ndAmendment]

Risk is what makes life exciting.. and of course that was PA.. Big difference between Southern PA and Southern MD..

Risk can also make life a catastrophe. The Southern PA market was fueled by Baltimore/Washington commuters.

 

[workin hard]

The mortage person offered us 2 types of mortage. The ARM loan or the fixed 80/20 30 year conventional loan. He seemed to push the ARM but we opted for the fixed rate. You can always re-finance to get a lower payment. Plus since it is our first house when we go to sell (which will eventually happen) I want more equity in it.

 

[CityGrl]

Looks like the only way I'm going to be able to afford something that's anywhere NEAR the city will be to take advantage of an interest-only loan.

Thanks for the advice/info.

 

[workin hard]

Looks like the only way I'm going to be able to afford something that's anywhere NEAR the city will be to take advantage of an interest-only loan.

Thanks for the advice/info.

There was only like a $120 difference in the payment when the compared the 2 for us. :shrug:

 

[2ndAmendment]

Looks like the only way I'm going to be able to afford something that's anywhere NEAR the city will be to take advantage of an interest-only loan.

Thanks for the advice/info.

As I understand it, the Japanese have 100 year mortgages that are inherited by the kids in order to afford even condos in Tokyo.