Interest-Only Loans
You may have heard about the the interest-only (i/o) loan. Although interest-only loans have been available for quite some time, they’re becoming more popular. Currently, almost half of all adjustable-rate mortgages are interest-only, according to E-Loan. But why would anyone want to get an interest-only loan? Isn’t the point of home-ownership to build equity in your investment? That may be one of the points, but an interest-only loan can be an interesting alternative if you meet several criteria. For instance, you need a credit score of at least 680 if you’re a salaried borrower, and if you’re self-employed you need a 700 or higher. To put interest only loans in historical perspective, they were very popular in the 1920s when home buyers wanted to free up cash to invest in the stock market. When the 1929 crash came, scores of foreclosures bankrupted the i/o homebuyers. Just something to keep in mind as we explore this option. The Good News About Interest Only Lo...