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Author: Iggywine Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308519  
Subject: Re: Interest Only Mortgage Date: 9/22/2005 4:29 PM
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A rather fascinating series of comments, but one factor I haven't seen mentioned bears mentioning:

Assuming you have the interest only loan for 5 years, and the expected bursting of the proverbial real-estate bubble occurs, what happens when your home at the end of the five-year period is worth LESS than the principal amount of your loan? What bank will loan you 110%, 120% (or possibly more) of the value of your home? And if by some strange reason (i.e, they don't want it back... LOL) they DO decide to make the loan, what type of over-market rate will you be charged?

Not to mention that, knowing from my own experience that what doesn't go to the loan goes to discretionary spending (i.e., Starbucks and other waste...), how realistic is it that you'll actually put the difference into investments - and INCREASE that difference every month? (Remember, with a traditionally amortizing mortgage, the principal paydown increases each month - albeit quite slowly.....)

Just a few thoughts....

George
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