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I own a house which will be paid off in the next 4 years.so I'm trying to combine this loan and another with which I intend to buy a second home. I checked recently that if I go f or an interest only loan, the interest rate comes out to be lower than 30 year frm. I believe in frugal living so I do intend to pay a little extra than the interest every month to reduce the loan balance. You think it's a good idea and worth considering?

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Adriel,

Welcome to the forum.

I think if you can afford then it is a very good idea to pay extra with your monthly payments. That will reduce your loan period and you can also save thousands of dollars. So you should talk with the lender ASAP.

Best of luck,
Larry

gmakerley · Posted: Fri Apr 25, 2008 7:48 am Post subject:

adriel, you had better get all the details about this "cheaper" loan. are you certain this isn't just an initial offering rate, and that it will not adjust in the near future? buyer beware!

interest only might be right for you, but it isn't right for everyone. you need to go in with your eyes wide open, and you need to understand 100% of the details. the bottom line - you need to be careful.

Niicss · Posted: Mon Apr 28, 2008 4:17 am Post subject:

Welcome Adriel,

Have you checked whether it is ARM or not? I think it is ARM and though it appears at the beginning Lower than the 30 year FRM but the rate will be adjusted 3 or 5 years. So can afford the mortgage payments then?

You can go for Interest only mortgage if you have a variable income and pay down your principal when you have good income.

kenl314 · Posted: Mon Apr 28, 2008 1:04 pm Post subject: watch for prepays-

Hi- Another note- is watch out for prepays. There are still loans out there with significant prepays, especially ones with initial teaser rates.
Also, I've found that most interest-only loan programs actually have a tad higher interest rate than a regular prin & int. repayment mortage. So that seems a bit sketchy to me.
Good luck,

Ken

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How about paying extra for interest-only loan?