4 Comments April 29th, 2010

Question about an interest only home loan?

Mike C asked:


I’ve been my house for 1 yr, would really like to lower my payment as much as posible so i can have extra cash to pay off so high interest debit…

1.) How much does this type of loan lower a payment?
2,) I do not plan on staying in this home for more then 5-6 yrs tops…
3.) Is those bigger companies (Quickin loans) good or dhould I consdier a smaller company?
4.) Would this be my best bet to get rid of some debit or is there a different method I should use…

Thanks for all your help.

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4 Responses to “Question about an interest only home loan?”

  1. Cory Z Says:
    May 2nd, 2010 at 4:37 am

    If you only plan on living in the home for 5 years then you should consider an Adjustable Rate Mortgage (ARM). They have some that are fixed for 5 years the the rate will jump up but since you plan on leaving it wont matter. If you decide to stay longer then you can refinance to a fixed rate mortgage.

  2. SCH Says:
    May 5th, 2010 at 12:36 am

    You will be paying on an interest only loan for the rest of your life if you don’t touch the principal…I know you say you don’t plan on living in the house more than 5 years, but you never know if something might change and you need to stay. Also, these types of loans the interset rate is variable, so you payment could be low now and next year the fed raises interest rates and your payment skyrockets. You would be better off with an ARM mortgage…usually with this type of loan you can get a really low rate for the 1st 5 years and then the rate jumps a lot, but you would be paying down the principal, so in 5 years you will have equity built up…so if you decide to refinance or move you will be in a better position than you would be if you only paid interest for 5 years.

  3. enoriverbend Says:
    May 8th, 2010 at 1:21 am

    Paying off high interest debt before low interest debt is usually a good idea. (Although you might have thought about doing this before buying the house, which would have been simpler.)

    You may want to consider a home equity loan, currently in the 8.5-9% -ish range. The paperwork’s simple. Do promise yourself to (a) not let the credit card debt creep up again, and (b) pay off the HELOC as quickly as possible.

  4. CommonCents Says:
    May 9th, 2010 at 11:18 am

    Depends on your loan balance and the interest rate.
    This is a good idea to lower you overall debt.

    If you have the equity, you should refinance and take cash out and pay off your high interest debt. This will lower your total payments AND become tax deductible.

    Shop around and understand your options. Most people don’t knwo how to shop for a loan, and pay more than they should.

    Based on your plan, get a 5 YR ARM, with interest only payments. (see below)

    You just need to understand the reasons for doing this and not get back into crazy debt.

    Make extra principal payments on a regular schedule.