Principal Payment On Interest Only?
Ryan is considering a refinance of his home mortgage to an interest-only loan.
ANSWER: An amatorizing mortgage pays off exactly as fast as an interest-only mortgage. The big lie of the interest-only mortgage is that the principle is applied differently, but it is not. If you take an interest-only loan and pay extra on it, it comes out exactly the same as paying extra on an amatorizing mortgage.
If you can lower your interest rate by getting a 15-year fixed mortgage, then do that instead. You’ll save money each year doing that.
Don’t fall into the interest-only loan trap. I would never, under any circumstances, take out an interest-only loan.