I agree with the I/O points – it was immaterial to me whether prices went up down or sideways when I got my loan. The problem with home ownership is that it is so equity illiquid as well as monthly cost consuming. I liked the I/O because it improved cash flow which is sometimes useful. I am in the process of starting a new business – and every entrepreneur knows one of the secrets of starting a business is keeping monthly expenses low. A higher monthly payment means even more money tied up in a house (to pay it down), and unless the plan is to keep it for a good portion of the mortgage period, it sometimes makes sense.
The best use of money is not to tie it up in paying off your house – the best use of money is to have it working for you. If you use standard investment risk/reward (5%, 6%, 8%?) I would agree that you might as well pay down the house (if you are going to stay there for 10 years or longer). And I would also agree that for many if not most people they should not go interest only. But if you are self employed, and want to grow your business you should not tie ANY extra money in paying off a house, you should invest it where it will create the most return.
If you have a stable job working for the man… then have the regular mortgage based on the number of years you expect to stay in the home.
For my last house – I put down 25% (500K) and financed 75% (1.5M). Interest only and I had the choice of further investing in one of my companies or selling it. We chose selling it which made the cash situation moot. The main business could always reverse and need extra cash – I hate to commit to locking up money to pay off a house.
