2005 June 11 | Wheatworks Blog: Financial Matters

Home

Archive for 11th June 2005

IO, IO, So Off to Work I Go

6/11/2005, 6:55 am

MSNBC has an excellent article, “Top cities for risky, interest-only mortgages: Borrowers may live to regret joining the boom.”

An Interest-Only mortgage is risky when it is used to buy more house than one can afford. While the initial period of interest-only payments may fit one’s budget, when required to start making principal payments, the total monthly payment can jump to an unaffordable amount leading to financial stress.

What’s one to do? You have several options:

1. Make certain you’ll have the cash free in your monthly budget to make the larger mortgage payments when the interest-only period is over. In other words, don’t use the “extra” monthly cash available during the interest-only period to purchase items you’ll still be paying for when the principal payments begin. That’s when you’ll want the extra cash.

2. If you have an interest-only mortgage and intend to live in your home for a period longer than the interest-only payments, consider refinancing. Current rates for 30 year fixed rate mortgages are less than 6%.

3. Learn more about interest-only mortgages. HSH Associates, Financial Publishers, has an excellent article on their web site titled, “The Principal Facts of Interest-only Mortgages”. You’ll find a link to it on their home page at: www.hsh.com

Share This Post ...