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URL:  http://boards.fool.com/well-i-actually-did-this-for-the-reasons-stated-23066199.aspx

Subject:  Re: Interest Only Mortgage Date:  9/22/2005  2:06 PM
Author:  mew5280 Number:  211194 of 308517

Well, I actually did this, for the reasons stated above, in February of this year. BUT, I had a huge problem. My house was appraised during the refinance at $260K. (I originally paid $130K but had taken money out so my loan was at $185K). I was taking some money out during the refinance to pay some of the CC debt off, but not all so the total new loan amount was $204K. No problem I thought. I thought the 260K appraisal seemed high but was certain I could get 235-240K.

Went to a realtor to talk about starting the sale process when lo and behold, the appraiser really pulled the wool over my eyes. Apparently the going rate for a house like mine is at tops $215K. I got another realtor, same conclusion. I was ignorant about appraisals, should have done more homework but I didn't. My tax assessment assessed the house at $200K without knowing I have a finished basement and second full bath and cooling system in the house so I just assumed I could get 230-240K.

This is of course, very circumstantial. In addition though, I lost my job in May and was on a VERY limited budget until a few weeks ago when I started working again so having a lower mortgage payment was good for me.

I agree that buying a house initially with a no interest mortgage is not good. But in my case, I think I'm OK as I do plan on selling in a year or so. I took my equity already and am OK with that, it happened, it's the past, I have new future goals and better saving goals that I didn't have before. I will either break even or make a teeny bit when I do sell (unless I keep it a really long time).

I'm also lucky because my house is in an old 1940's neighorhood surrounded by brand new housing, schools, hospitals and shopping in a major city. The chances are very good it will continue to increase in value. It's an area where people are starting to pop the tops on older ranch homes (mine) and build up or out (huge lots).

So I'm not sorry I have an interest only but would only advise someone to do this if they own the home and have equity and plan on selling anyway within the length of the loan term.

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