what is an Interest-Only Mortgage

[kev374]

I always hear this, but infact every neighborhood I have lived in, has had the same neighbors for YEARS. I find this hard to believe

Probably right. It’s prohibitively expensive to sell a house/move at the current price points, transaction costs and increased tax basis will not make it possible for most.

I know a few friends who want a bigger place but are STUCK in their homes because they cannot afford to upgrade even though they bought 7-10yrs ago.

[little lady]

“I know a few friends who want a bigger place but are STUCK in their homes because they cannot afford to upgrade even though they bought 7-10yrs ago.”

Exactly, even if your mortgage payment is the same, your taxes shoot from 2k to 10k (with all the hoa’s and 2% mello roos around). So why make your financial situation worse.

[little lady]

“I know a few friends who want a bigger place but are STUCK in their homes because they cannot afford to upgrade even though they bought 7-10yrs ago.”

Exactly, even if your mortgage payment is the same, your taxes shoot from 2k to 10k (with all the hoa’s and 2% mello roos around). So why make your financial situation worse.

[sdrealtor]

A month or so ago, we tested this theory out via randomly selected streets. I beleived tenure was longer and some other posters didnt. I found the average ownership appeared to be well over 10 years. I think Realtors see the movers not the squatters so they can be a bit biased toward the concept of more frequent moving. There also seems to be quite abit of propaganda out there but I suspect it is heavily distorted by younger more mobile people. From the time I graduated HS until I was 32, I moved 17 times in 15 years. I think I probably skewed those residency numbers a bit. Thankfully, I found paradise and I AINT GOIN NOWHERE ANYMORE!

[sdrealtor]

A month or so ago, we tested this theory out via randomly selected streets. I beleived tenure was longer and some other posters didnt. I found the average ownership appeared to be well over 10 years. I think Realtors see the movers not the squatters so they can be a bit biased toward the concept of more frequent moving. There also seems to be quite abit of propaganda out there but I suspect it is heavily distorted by younger more mobile people. From the time I graduated HS until I was 32, I moved 17 times in 15 years. I think I probably skewed those residency numbers a bit. Thankfully, I found paradise and I AINT GOIN NOWHERE ANYMORE!

[patb]

“Most people don’t own a home for 30 years or even 10 years”

I suspect this is a Lie with the facts.

Until you are 22, most people don’t own a home, they are
domestic chattel or students at a school.

if you look at the stats, historically 40%-50% of the American public
don’t own homes.

Now lets see why?

Age
1-18 Dependent minor (0% home owndership)
18-22 College student, Military service, etc (1-5% home owndership)
22-30 Swinging singles (15% home owners)
30-45 Married couples, divorcees, bachelors,spinsters,gays 50% Owners
45-60 Middle aged (70% owners)
60-80 retirees, nursing home resident, snowbirds (40% owners)

So sure, 40% never buy a home, 30% own homes for a while, 30% lifelong.

You could do the analysis out other ways, but its the same story.

[patb]

“Most people don’t own a home for 30 years or even 10 years”

I suspect this is a Lie with the facts.

Until you are 22, most people don’t own a home, they are
domestic chattel or students at a school.

if you look at the stats, historically 40%-50% of the American public
don’t own homes.

Now lets see why?

Age
1-18 Dependent minor (0% home owndership)
18-22 College student, Military service, etc (1-5% home owndership)
22-30 Swinging singles (15% home owners)
30-45 Married couples, divorcees, bachelors,spinsters,gays 50% Owners
45-60 Middle aged (70% owners)
60-80 retirees, nursing home resident, snowbirds (40% owners)

So sure, 40% never buy a home, 30% own homes for a while, 30% lifelong.

You could do the analysis out other ways, but its the same story.

[SD Realtor]

Pretty well said Rustico. The point here is that the IO is not for everyone. However there are many people out there who are sophisticated enough to take advantage of the IO. Most everyone I know who has used an IO actually can afford to make the payments on a standard fixed rate fully amortized loan.

My bottom line is this; If you cannot afford the home, don’t buy the home. If you cannot afford it now, if you won’t be able to afford it in 10 years then don’t buy it. If you are going to move in 5 years for sure, REGARDLESS of the housing market, then it makes sense to pay as little principal as possible. Common sense dictates a clear exit strategy regardless. Again, if all of you have neighbors and friends that have lived in their homes well beyond 10 years then that is great. My feelings are still that a higher percentage of sold homes are owned less then 10 years then over 10 years. I do not have any statistical data to back that up but I will take a sample of a zip code and look.

[SD Realtor]

Pretty well said Rustico. The point here is that the IO is not for everyone. However there are many people out there who are sophisticated enough to take advantage of the IO. Most everyone I know who has used an IO actually can afford to make the payments on a standard fixed rate fully amortized loan.

My bottom line is this; If you cannot afford the home, don’t buy the home. If you cannot afford it now, if you won’t be able to afford it in 10 years then don’t buy it. If you are going to move in 5 years for sure, REGARDLESS of the housing market, then it makes sense to pay as little principal as possible. Common sense dictates a clear exit strategy regardless. Again, if all of you have neighbors and friends that have lived in their homes well beyond 10 years then that is great. My feelings are still that a higher percentage of sold homes are owned less then 10 years then over 10 years. I do not have any statistical data to back that up but I will take a sample of a zip code and look.

[little lady]

“There also seems to be quite abit of propaganda out there but I suspect it is heavily distorted by younger more mobile people. From the time I graduated HS until I was 32, I moved 17 times in 15 years”

Could it be that the people who move alot (say military families) skew this number? (They can move every three years or so.) Therefore increasing the amount, to be more than is actually in the overall population….(hope you can follow me)

[little lady]

“There also seems to be quite abit of propaganda out there but I suspect it is heavily distorted by younger more mobile people. From the time I graduated HS until I was 32, I moved 17 times in 15 years”

Could it be that the people who move alot (say military families) skew this number? (They can move every three years or so.) Therefore increasing the amount, to be more than is actually in the overall population….(hope you can follow me)

[SHILOH]

“In principle, what the IO mortgage appears to be is an
institutionalized form of Serfdom. You owe the landlord
forever, and you are in debt forever.”

Agreed subprime mortgage industry debacle of the past 6 years looks to me like an attempt at institutionalized serfdom. When they start talking about 40 year loans or loans that you can pass on to the next generation…what are the chances in the current consumer economy that people would get out from under debt?

Does anyone know how the Mortgage backed securities or bonds…sold to the Chinese,will affect trading, production and our relationship with the Chinese? When Greenspend “designed” this interest-rate mess…was there some political deliberate agenda here?

[SHILOH]

“In principle, what the IO mortgage appears to be is an
institutionalized form of Serfdom. You owe the landlord
forever, and you are in debt forever.”

Agreed subprime mortgage industry debacle of the past 6 years looks to me like an attempt at institutionalized serfdom. When they start talking about 40 year loans or loans that you can pass on to the next generation…what are the chances in the current consumer economy that people would get out from under debt?

Does anyone know how the Mortgage backed securities or bonds…sold to the Chinese,will affect trading, production and our relationship with the Chinese? When Greenspend “designed” this interest-rate mess…was there some political deliberate agenda here?

[Alex_angel]

IO loans are not the devil if you actually are smart enough to make principal payments. Most people though rest on their laurels and don’t realize they are leasing a home as opposed to buying down and owning it. In 10 years when interest rates are 15% and you reset at 5.5% for the remainder 20 years you will be laughing at how low your payment is.

[Alex_angel]

IO loans are not the devil if you actually are smart enough to make principal payments. Most people though rest on their laurels and don’t realize they are leasing a home as opposed to buying down and owning it. In 10 years when interest rates are 15% and you reset at 5.5% for the remainder 20 years you will be laughing at how low your payment is.

[Author]

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