When is an interest-only mortgage a good idea?
Lower monthly payments are the appeal of interest-only mortgages. But those low payments don’t last forever. Typically, within five to seven years the borrower must start to pay principal and the payments jump skyward. Members of the Financial Planning Association of Greater Indiana offer advice on whether such an option is right for you.
The quick answer to this question: never. his is especially true if the loan is variable and interest rates are rising. Unless the borrower has access to a substantial amount of liquid capital that can be used to fund the higher debt service, retire or refinance the principal, the property could quickly become the subject of a foreclosure proceeding, which often results in the loss of a substantial amount of equity.
