what is an Interest-Only Mortgage

[Raybyrnes]

Or look to invest the differnce. Would the same people who swear by the conventional fixed rate mortgage swear by Whole Life Insurance Policies. Do we just dismiss nuy term and invest the difference. The key is investing the difference. If you are undiciplined the 30 year conventional is the way to go. If you are fair diciplined the average market return would beat the strategy of paying down the mortgage.

[Raybyrnes]

Or look to invest the differnce. Would the same people who swear by the conventional fixed rate mortgage swear by Whole Life Insurance Policies. Do we just dismiss nuy term and invest the difference. The key is investing the difference. If you are undiciplined the 30 year conventional is the way to go. If you are fair diciplined the average market return would beat the strategy of paying down the mortgage.

[NotCranky]

Alex,
The point of getting interest only loans is to not pay principal. They are not to be used frivolously that is all.

I read your remarks the other day on another thread and I have a recommendation for you. Create a new file in a manila folder or something like that. Call the file…”MY NEW HOUSE.” over time put things that interest you about your new house in that file..Forget about wether prices are going to go up down or whatever. Then make a mental note to yourself..
SELF. “I am putting this stuff into my “NEW HOUSE” File. I will not buy a house until I understand what I the hell I am talking about.” By that time hopefully the market will provide some chance of you succeeding. ALex it is very important to make a wise financial decision when you sign Mortgage documents. Time is on your side Alex. I have nothing against you Alex you need to listen (read and head)more. IMHO

[NotCranky]

Alex,
The point of getting interest only loans is to not pay principal. They are not to be used frivolously that is all.

I read your remarks the other day on another thread and I have a recommendation for you. Create a new file in a manila folder or something like that. Call the file…”MY NEW HOUSE.” over time put things that interest you about your new house in that file..Forget about wether prices are going to go up down or whatever. Then make a mental note to yourself..
SELF. “I am putting this stuff into my “NEW HOUSE” File. I will not buy a house until I understand what I the hell I am talking about.” By that time hopefully the market will provide some chance of you succeeding. ALex it is very important to make a wise financial decision when you sign Mortgage documents. Time is on your side Alex. I have nothing against you Alex you need to listen (read and head)more. IMHO

[SD Realtor]

Alex… aye caramba!

Guys lets get back to basics. Most of you here can skip this post.

When you hear people refer to a 30 year fixed rate loan, (amortized over 30 years) then the following applies; Your monthly payment is a combination of interest and principal. 30 years at 12 payments a year equals 360 payments. When you sign your loan docs you will see an amortization table. This table shows how much interest you pay each payment. You see that with each payment, you will see a bit more of the payment (a tiny tiny bit) be applied to principal compared to the previous payment. Why? Because the lenders want all or as much of the interest paid up front as possible.

Now I will refer to a 10 year interest only loan. This commonly means that you pay a FIXED rate that DOES NOT change or reset for 30 years. The difference is that for the first 10 years you do not pay any principal. You only pay interest. So your monthly payment for the first 10 years is lower then the loan I discussed above. Now after 10 years your payment will go up because you will start paying the principal.

What else is different? Well the biggest difference is the interest rate. The 30 year standard loan will be at a lower rate the then I/O loan. On the average 3/8% more. So your payment will be lower for the first 10 years of the I/O loan BUT over the life of the loan you will pay more sheer dollars in interest.

The moral? It makes NO SENSE AT ALL to get an I/O loan but to pay the principal on it for the first 10 years. Simply get the 30 year standard fixed rate loan and save some money.

SD Realtor

[SD Realtor]

Alex… aye caramba!

Guys lets get back to basics. Most of you here can skip this post.

When you hear people refer to a 30 year fixed rate loan, (amortized over 30 years) then the following applies; Your monthly payment is a combination of interest and principal. 30 years at 12 payments a year equals 360 payments. When you sign your loan docs you will see an amortization table. This table shows how much interest you pay each payment. You see that with each payment, you will see a bit more of the payment (a tiny tiny bit) be applied to principal compared to the previous payment. Why? Because the lenders want all or as much of the interest paid up front as possible.

Now I will refer to a 10 year interest only loan. This commonly means that you pay a FIXED rate that DOES NOT change or reset for 30 years. The difference is that for the first 10 years you do not pay any principal. You only pay interest. So your monthly payment for the first 10 years is lower then the loan I discussed above. Now after 10 years your payment will go up because you will start paying the principal.

What else is different? Well the biggest difference is the interest rate. The 30 year standard loan will be at a lower rate the then I/O loan. On the average 3/8% more. So your payment will be lower for the first 10 years of the I/O loan BUT over the life of the loan you will pay more sheer dollars in interest.

The moral? It makes NO SENSE AT ALL to get an I/O loan but to pay the principal on it for the first 10 years. Simply get the 30 year standard fixed rate loan and save some money.

SD Realtor

[NotCranky]

SD REALTOR
I am sure he is learning and he is as intelligent as anyone,not that you have said otherwise.
It is just his style to throw out everything he is working on to see what feed back he gets then he makes gains and does it again. I give him credit for trying.
In your defintition you said something I think we hear a lot and I probably say half the time when I am on the topic too. It’s very trivial.On a fixed you pay more interest at the start because the principal is larger not because the lender wants money up front. Its just a “straight note”.
Hope you are having a good day!

[NotCranky]

SD REALTOR
I am sure he is learning and he is as intelligent as anyone,not that you have said otherwise.
It is just his style to throw out everything he is working on to see what feed back he gets then he makes gains and does it again. I give him credit for trying.
In your defintition you said something I think we hear a lot and I probably say half the time when I am on the topic too. It’s very trivial.On a fixed you pay more interest at the start because the principal is larger not because the lender wants money up front. Its just a “straight note”.
Hope you are having a good day!

[Author]

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