Interest-only Home Mortgages Invest in Foreclosure
You have seen the glitzy ads on TV talking about a "new kind of home mortgage" that can "get you into the house of your dreams". Sounds too good to be true? It is. These are interest-only home mortgages and one of the fastest ways to find yourself in foreclosure.
An interest-only home mortgage is a particular type of home mortgage where for the first year, or few years, all you are required to pay is interest. Of course, you are always welcome to pay on principal. The problem is that after the first period of time, your payments double or triple. When you can't pay, you lose your house.
These home mortgages can be either fixed or adjustable rate. An adjustable rate interest-only home mortgage offers all of the down sides to an adjustable rate home mortgage, plus the problems of an interest-only home mortgage. If you can only get this type of loan, look into a pup tent. These home mortgages have horrible rates of foreclosures.
Interest-only loans are sold with a list of assumptions that are at best half-truths, better known as lies. Here they are:
Lie 1: You will earn substantially more money next year.
If they could really tell the future, they would be in the stock market, not offering you a home mortgage. No one can tell you how much you will make next year, unless you are in the military. Even then you know that your raise won't be substantial. During hard markets, PhD's have had to flip hamburgers. Don't assume that that law degree will lead to immediate riches.
Lie 2: With a lower payment, you will pay more on principal.
Yeah, right. If you are having a hard enough time making ends meet now, how do they think that you are going to have an extra $1000 each month? Something will come up, and you'll end up making your payments, but not much over.
Lie 3: You deserve a bigger house.
Okay, this is probably true, but saints often live in shacks. Don't drive yourself into bankruptcy for an extra 500 square feet.
Lie 4: You will probably refinance anyway.
Most loans have a penalty if you refinance them within the first two years, and many home mortgage companies don't want to refinance that quickly, either. So you will likely be stuck with a huge payment before you are eligible to refinance.
So, with all this negativity, is there ever a time for an interest-only home mortgage? Yes, but a very few.
If you have a trust fund that is coming to you before you have to start paying on principal, and you know that you will be able to use that money on housing, then it may be a good way to tide you over. If you are a very savvy investor with bonds that will mature soon, then you probably aren't reading this. If this is a fix-it-and-flip-it scheme that you will live in AND the home has appraised for significantly more than the loan amount, then you probably will be able to refinance after work has been done. Outside of circumstances like these, stay away from an interest-only home mortgage.
Be sure to visit this website.
http://www.homemortgage-tips.info
An interest-only home mortgage is a particular type of home mortgage where for the first year, or few years, all you are required to pay is interest. Of course, you are always welcome to pay on principal. The problem is that after the first period of time, your payments double or triple. When you can't pay, you lose your house.
These home mortgages can be either fixed or adjustable rate. An adjustable rate interest-only home mortgage offers all of the down sides to an adjustable rate home mortgage, plus the problems of an interest-only home mortgage. If you can only get this type of loan, look into a pup tent. These home mortgages have horrible rates of foreclosures.
Interest-only loans are sold with a list of assumptions that are at best half-truths, better known as lies. Here they are:
Lie 1: You will earn substantially more money next year.
If they could really tell the future, they would be in the stock market, not offering you a home mortgage. No one can tell you how much you will make next year, unless you are in the military. Even then you know that your raise won't be substantial. During hard markets, PhD's have had to flip hamburgers. Don't assume that that law degree will lead to immediate riches.
Lie 2: With a lower payment, you will pay more on principal.
Yeah, right. If you are having a hard enough time making ends meet now, how do they think that you are going to have an extra $1000 each month? Something will come up, and you'll end up making your payments, but not much over.
Lie 3: You deserve a bigger house.
Okay, this is probably true, but saints often live in shacks. Don't drive yourself into bankruptcy for an extra 500 square feet.
Lie 4: You will probably refinance anyway.
Most loans have a penalty if you refinance them within the first two years, and many home mortgage companies don't want to refinance that quickly, either. So you will likely be stuck with a huge payment before you are eligible to refinance.
So, with all this negativity, is there ever a time for an interest-only home mortgage? Yes, but a very few.
If you have a trust fund that is coming to you before you have to start paying on principal, and you know that you will be able to use that money on housing, then it may be a good way to tide you over. If you are a very savvy investor with bonds that will mature soon, then you probably aren't reading this. If this is a fix-it-and-flip-it scheme that you will live in AND the home has appraised for significantly more than the loan amount, then you probably will be able to refinance after work has been done. Outside of circumstances like these, stay away from an interest-only home mortgage.
Be sure to visit this website.
http://www.homemortgage-tips.info
posted by mileslancaster at 11:37 PM
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