I re-fied with an I/O loan in ’03 for my rental property purchased in ’02. I typically pay the equivalent of the fully amortized amount for most months. Between tenants or when there is a large expense (e.g. new hot water tank), I drop to the I/O only for cash flow purposes.
At the time of purchase my loan was 80% LTV. Currently It’s about 50-60% LTV. I could pay the loan off with other assets, but it makes more sense from a tax/investment planning in my case not to do so.
The problem I/O loans are those layered with others risks, such as 100% LTV, low FICO, minimal assets, etc.
In the right hands I/O loans are useful and non-toxic.
