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Besides the lower amount you have to pay monthly, there isn't a whole lot that is positive about the Interest Only (IO) mortgage. That hasn't stopped people from staying away from them.
While nearly non existent 5 years ago, they now account for about a third of all new housing loans according to mortgage data firm LoanPerformance. In areas where the housing market is hottest, as many as 7 out of every 10 new loans are the interest only type.
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While the lower rates allow people to afford more home that with a traditional mortgage, the low payments don't last forever. Eventually the interest-only mortgage will convert into a standard loan. Unless the loan is refinanced before the interest only loan converts, most people will see a huge increase in their required monthly payments.
For a look at the pros and cons of interest only mortgages, <A HREF="http://money.cnn.com/2005/05/05/real_estate/re2005_mortgage_0506/index.htm">money.cnn.com</A> currently has a good article on their site.
While nearly non existent 5 years ago, they now account for about a third of all new housing loans according to mortgage data firm LoanPerformance. In areas where the housing market is hottest, as many as 7 out of every 10 new loans are the interest only type.
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While the lower rates allow people to afford more home that with a traditional mortgage, the low payments don't last forever. Eventually the interest-only mortgage will convert into a standard loan. Unless the loan is refinanced before the interest only loan converts, most people will see a huge increase in their required monthly payments.
For a look at the pros and cons of interest only mortgages, <A HREF="http://money.cnn.com/2005/05/05/real_estate/re2005_mortgage_0506/index.htm">money.cnn.com</A> currently has a good article on their site.
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