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!
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