I read an article today about interest only mortgage payments. The title of the article was "Interest-only mortgages can help young professionals." What?!
When I think of young professionals, I think of people just out of college or people who have just started to establish themselves in an industry. Usually, these types of people already have a lot of debt from student loans, credit cards, cars, etc. Now, we are all taught that making the minimum payments on anything is a bad thing! You aren't paying off anything, just maintaining a level of debt with a really good payment record. If you are only adding more purchases and additional loans, that doesn't help you at all! As a Christian, I believe that we are to be good stewards of God's gift (money). We aren't supposed to owe anything and if we do, pay it back as soon as possible. Travis and I are in the process of paying all of our debt off and we plan to be debt-free by the end of 2009. What a great feeling! But how would that be possible if we only pay the minimum payments.
On the other hand, the article mentioned that this allowed for the individual to control how much of the actual loan amount to pay off every month. This could be positive, in that it allows the person to pay off as much of the principle as they want, with one payment. There isn't anyone taking another percentage of the interest from the additional payment. However, in the article is says that it "does not mean that they will be beating the interest rates but they will feel a "little more in control" as they know they can "do it whenever they want". " Again...what?! I would love to have faith that everyone out there is better at saving than me! But, how realistic is that? Unless the person is set up to receive a huge bonus at the end of the year that they planned on putting completely toward the mortgage, I don't see how this would be helpful.
Being an owner of two houses right now, this just doesn't seem like an option I would go for.
There are so many great mortgage options out there that help first time buyers and financially strapped individuals to achieve ownership of a home without putting their credit scores in danger.
Mortgages
ELS MONJOS DEL MONESTIR DE SANT CUGAT
11 months ago
3 comments:
Bad, bad, bad!!! In fact, most people who do this are ending up foreclosing right now. The reason people do it is because they can't afford the house in the first place and have no business buying a house at that time. This just means that it catches up to them and they end up not being able to make the minimum payments. In fact, David and I are hoping that when we get serious about selling our house and buying a new one, we will get a bigger house for a lower price because there are sooooooo many foreclosures right now. So sad. The people who are thinking about this need to talk to Dave Ramsey.
JB
I am in the mortgage business at Chase and I've never done an I/only loan because I do not believe in them. I agree...BAD news! If you can't comfortable afford the mortgage payment, you shouldn't buy the house! Great Post!
I agree about the interest-only morgages being BAD. And good for you on your road to financial freedom! Todd and I did Dave Ramsey's FPU a while back and are working HARD to become debt-free, too.
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