is a 10 year interest only loan a bad idea?

Asked by Cinders, San Diego, CA Fri Aug 1, 2008

I am a working single mom but make decent money. I would like to get into a reasonable home for my children and for a tax purposes. Is it a bad idea to try to obtain a loan like this? Or am I better off doing a piggy back loan to be able to qualify? Thanks.

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3
Monique & Joe…, Agent, Beverly Hills, CA
Fri Aug 1, 2008
Hello Cinder,

If you expect your income to increase in 10 years to where the payment will be doable than do it. If you can do a little less time say 3 or 5 years of interest only that will keep you payment at a more normal level whent he interest only adjusts.

Best,

Monique Carrabba
The Reavis Group
1 vote
Sj209, Both Buyer And Seller, California
Fri Aug 1, 2008
Bad idea. Just get a regular loan, nothing fancy.
0 votes
Robert Chome…, , San Diego, CA
Fri Aug 1, 2008
Hi,

Interest only loans have been demonized in the media, but they are excellent loan products. I have a 30 year fixed loan with a 10 year interest-only option on one of my OWN properties, and I'm a mortgage loan officer!

Most people don't understand that the interest-only payment is OPTIONAL. If you want to pay your loan balance down, you can just add more to the monthly check you send to your lender on months when you have additional income. You can pay your interest-only loan off in 30 years, 20 years, 15 years...just by adding a little more to your payment each month. But with the interest only option, you also always have the option of having to make only the interest payment during months when money is tighter.

However with that said, if the interest rate on a loan that has the interest-only option is higher than the loan with the straight fully amortized payment, you may want to take the fully amortized loan. You may not want to pay a higher rate just to get the interest-only option. But if the rate is equal, why not take the interest-only only option?

Warm Regards,
Rob Chomentowski
Sr. Loan Officer
Affinity Financial
http://www.affinity-financial.com
rob@affinity-financial.com
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