Anyone buy a house with an Interest Only Loan? I have only heard bad things about this kind of loan & was wondering if any of you have had a good experience with this type of loan.

Personally, I wouldn't do one. I do know people who have and it worked out for one because he was only going to be in the house 3 years anyway so it kept his payments down. Problem is now, the market has gone down so unless it goes back up in the next year, his house won't be worth the balance of the loan (since it's interest only). Each situation is different but I like a fixed 30 year loan. Then I make extra payments (or add on a little each month) so that it's more like a 15-20 year loan.

good luck whatever you decide

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It's my understanding that these type loans were intended for "flippers". People that only need the loan long enough to buy, renovate and sell a property, usually less than 6 months.
Or someone who knows that their time in the home is limited. This is one of the types of loans that has come under scrutiny as being preditory.

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Life isn't about waiting for the storm to pass
It's about learning to dance in the rain.

Just because a loan is interest only doesn't mean you are only allowed to pay interest. You can figure out what the payment would be at the given rate to pay it off in 30 or whatever years and make that payment.

Interest only loans can be beneficial for self employed people who may not get a steady paycheck, it allows some flexibility in the payments, allows you to make a lower payment if you need to.

One reason people ran into trouble with these loans is because they expected the real estate market to continue to head up and expected they would have all kinds of equity. If you are paying interest only and your home decreases in value, you are then upside down in the loan because you have not paid down any principle.

Also, most if not all of these loans were adjustable and as rates are going up their payments are going up. But anyone signing an adjustable has the ability to caculate the payment at the highest possible rate before closing to determine the highest possible payment and decide if they are comfortable with it.

They gambled and lost, quit the whining. (Not you OP, just my opinion regarding all the woe is my foreclosure stories.)

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Good advice above.

I would definitely not look at an interest only loan as an excuse to pay interest only. As Tessa said, you need to calculate to find out what the payments would be if you treated the loan like a fixed rate 30-year loan and make those payments EVERY month that you possibly can. If you have a low income month, you can adjust down to the interest only payment but if at all possible, be sure to make it a goal to pay some on the principal EVERY single month.

Hope that makes sense.

That is really who should use them, but not who always gets talked into them.

I would say they are really not good for the average homeowner. Over the last couple of years people who don't understand a thing about loans have been talked into these and piggybacking, adjustable rates, etc. anything to be able to afford a home. Now all of those homeowners who were on the edge are looking over, they are out of money, their morgage is getting bigger and their house is worth less.

Don't take the loan just because it has a cheaper payment, it will catch up with you eventually.

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