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Home Loans.....  
User currently offlineBNAflyer78 From United States of America, joined Feb 2005, 258 posts, RR: 0
Posted (8 years 7 months 2 weeks 1 day 22 hours ago) and read 721 times:

Has anyone ever had good or bad experiences with an interest-only loan? I'm looking to purchase a new home and am exploring financing types - it seems that all the loan officers are pushing this type of loan, but I'm still a little leery of it. Thoughts?

Ben in ATL


Long live the Widget!
7 replies: All unread, jump to last
 
User currently offlineMlsrar From United States of America, joined Mar 2000, 1417 posts, RR: 8
Reply 1, posted (8 years 7 months 2 weeks 1 day 22 hours ago) and read 714 times:

Be wary, as these loans often lure buyers into principals that are out of their income ranges. Interest-only loans seem to offer a means to home ownership, but you have to discipline yourself to pay above interest-only in order to pay down your principal.

The attractiveness is the low payment, though you need to remember, if you never touch your principal, you're never gaining equity. The basis of appreciation will give you some return, but not as much as a conventional loan.

Rates are still low enough to justify a conventional 30-year fixed.

Just my .02.



I mean, for the right price I’ll fight a lion. - Mike Tyson
User currently offlineDL021 From United States of America, joined May 2004, 11447 posts, RR: 75
Reply 2, posted (8 years 7 months 2 weeks 1 day 22 hours ago) and read 712 times:
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Quoting BNAflyer78 (Thread starter):
Has anyone ever had good or bad experiences with an interest-only loan? I'm looking to purchase a new home and am exploring financing types - it seems that all the loan officers are pushing this type of loan, but I'm still a little leery of it. Thoughts?

Ben in ATL

Dude, this is only for you if you want to take advantage of a very low rate, or you want to flip a house (which is a passing fad for most people).

Be cautious of this....it's been a real tool for getting people in over their heads with house notes.



Is my Pan Am ticket to the moon still good?
User currently offlineBNAflyer78 From United States of America, joined Feb 2005, 258 posts, RR: 0
Reply 3, posted (8 years 7 months 2 weeks 1 day 21 hours ago) and read 710 times:

Quoting DL021 (Reply 2):
Dude, this is only for you if you want to take advantage of a very low rate, or you want to flip a house (which is a passing fad for most people).

Be cautious of this....it's been a real tool for getting people in over their heads with house notes.

That's kinda what I've gathered from research, but all the loan officers for the builders I'm looking at are heavily pushing these loans. It's almost like they are TRYING to qualify unqualified applicants just to meet a quota or something. Anyway, thanks for the input!



Long live the Widget!
User currently offlineRoadrunner165 From United States of America, joined Oct 2000, 874 posts, RR: 9
Reply 4, posted (8 years 7 months 2 weeks 1 day 19 hours ago) and read 697 times:

Quoting BNAflyer78 (Reply 3):
but all the loan officers for the builders I'm looking at are heavily pushing these loans. It's almost like they are TRYING to qualify unqualified applicants just to meet a quota or something.

This should be your first sign something is fishy.
To me it seems like all they care about is selling you a house, not weather or not you can afford to pay for the house. Ask yourself this question, do the loan officers have your best interest in mind? Maybe you should shop around and go look for another builder. Interest only loans are worthless.


Adam


User currently offlineLt-AWACS From , joined Dec 1969, posts, RR:
Reply 5, posted (8 years 7 months 2 weeks 1 day 19 hours ago) and read 694 times:

Not a great idea IMO. You can go no money down (I did it on VA loan) on an FHA type loan, or VA if you qualify, and then still build equity. But interest only would be bad unless it is a second home or rental type quick turn.

Ciao, and Hook 'em Horns,
Capt-AWACS, God Hates Fred Phelps


User currently offlineJafa39 From , joined Dec 1969, posts, RR:
Reply 6, posted (8 years 7 months 2 weeks 1 day 19 hours ago) and read 691 times:

Quoting BNAflyer78 (Reply 3):
That's kinda what I've gathered from research, but all the loan officers for the builders I'm looking at are heavily pushing these loans. It's almost like they are TRYING to qualify unqualified applicants just to meet a quota or something.

You got it!!! Some of these are linked to investment or insurance endowments to clear the principle at the end of the term, many, many Brits got caught out this way and brokers got sued for mis-selling.


User currently offlineCaptOveur From , joined Dec 1969, posts, RR:
Reply 7, posted (8 years 7 months 2 weeks 1 day 18 hours ago) and read 685 times:

Quoting BNAflyer78 (Reply 3):
It's almost like they are TRYING to qualify unqualified applicants just to meet a quota or something.

Once they close the house, the builder will factor the loan off to another bank. Then, it is off their books and they don't give a shit what happens to it. They want to sell a house, not marry you. So yes, they are pushing the limit on qualification.

Aside from the lower payment I don't see the benefit of these loans, unless you are intending on getting out of the place in a hurry. It is like you are negotiating a payment instead of a sales price, which is not a good thing to do.


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