Only Debt is House, But Interest Only?

Is it a good idea to ever consider an interest-only loan?

QUESTION: Mike is thinking about getting an interest-only loan since his only debt is his house.  He plans to pay extra toward the principle if he goes with an interest-only loan.  Is this a good idea?

ANSWER: Interest-only is a horrible mortgage.  You can think that you’re going to pay extra toward the principle, but the FDIC says that 97% of people do not pre-pay on their loans.  That’s almost everybody!  When you have an interest-only loan you end up only paying on the interest, which is a great way to be in debt for the rest of your life!