Interest only mortgages

[Ima saver]

I just read an article on the number of interest only mortgages that are being made. My state led the pack. In 2004, 50.4% Of the mortgage loans issued for purchases of single family homes in Georgia, were to pay interest only. I think that is terrible. What do you think?

[frugalfarmwife]

Re: Interest only mortgages

I think that they're the ultimate gamble, if the real estate bubble bursts they're up the creek without a paddle! This is one thing I'd NEVER do!

kj

[homeCooking]

Re: Interest only mortgages

Well that's not the worse. There is another kind of mortage for those that can't even afford interest only call reverse mortage or something like that.

From what I understood you pay no principal and less interest that you should so your payment is smaller but you debt grows. That is in 30 years you not only do not own the house but you owe more that you bought for!!!

THIS IS HORRIBLE!!
I am old school, I think that they point of buying a house is eventually own it!!

[Synacle1]

Re: Interest only mortgages

My parents looked into a reverse mortgage. From what I was told the bank pays them, either quarterly or in a lump sum. Then in 30 years (or when they die) the bank gets the house. Thats why most companies only offer reverse mortgages to people 65 or older.

[sweeps]

Re: Interest only mortgages

Reverse mortgages make sense in some situations. Say an elderly person owns a house and wants to continue living in it, but he or she needs cash flow. The bank pays a monthly mortgage payment to the person, and then when he or she dies, the bank gets the house. Everyone's happy.

HomeCooking, what you're referring to is a negative amortization loan. Definitely a risky loan, particularly with interest rates going up and housing prices leveling off...

[cercis]

Re: Interest only mortgages

I wouldn't have expected Georgia to lead the pack. I thought GA was still a fairly affordable state in regard to housing. I would have expected California and New York to be in the top 2.

[Ima saver]

Re: Interest only mortgages

Number one is Georgia, followed by California, Colorad, Nevada and district of Columbia.