TooTall" TooTall[at]TooTall.com, writes:

<< <i> I think you missed the question. The question referred to interest only
ARM. Is that what you like?? </i> >
An Option ARM has as one of its 4 options to pay interets only.

I think you missed the question. The question referred to interest only
ARM. Is that what you like??


"TTRoberts" <ttroberts[at]aol.com> wrote in message
news:20040302130027.19482.00000850[at]mb-m16.aol.com...
- quote -

"John A. Weeks III" john[at]johnweeks.com, writes:

<< <I> In article <20040302130027.19482.00000850[at]mb-m16.aol.com> , TTRoberts
<ttroberts[at]aol.com> wrote:

- quote -


That may be, but ARM's also come with risk. The risk is that the rate could go
up a few points, and the homeowner might no longer be able to afford the
payments. Most folks seem to buy too much house, and they take on all that
they can pay plus a little bit more. Not
many mortgage holders could afford a 50% increase in their payment. As a
result, despite lower costs, they have to avoid the risk and lock in a fixed
rate payment.</i> >
Most people tend to look at it this way. But that risk is overstated for the
most part since ARMs are not quite the same as they used to be. And if one
understands the differences between COSI, CODI, COFI, MTA and LIBOR mortgages,
one can choose one that is much less risky than what ARMs used to be 20 years
ago or so.

However, it's true that those who buy more that what they can afford put
themselves as much greater risk. If one is going to be in a house for 15+
years or more and will not have occasion to re-fi every several years, then a
fixed rate may make more sense.

In article <20040302130027.19482.00000850[at]mb-m16.aol.com> , TTRoberts
<ttroberts[at]aol.com> wrote:

- quote -

That may be, but ARM's also come with risk. The risk is that the
rate could go up a few points, and the homeowner might no longer be
able to afford the payments. Most folks seem to buy too much house,
and they take on all that they can pay plus a little bit more. Not
many mortgage holders could afford a 50% increase in their payment.
As a result, despite lower costs, they have to avoid the risk and
lock in a fixed rate payment.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

- quote -

Unfortunately, such conclusions tend to be based on antiquated experienced or
limited information/knowledge. The lending environment is very different from
what it was back in the 80's. Not all ARMs are the same and certainly not all
based on the prime rate as many were then.

I like ARM's and as Greenspan has pointed out, ARM's over the long term tend to
produce lower costs over the long term than 30 year fixed rate mortgages. That
is, most people would have less interest cost with an ARM than a 30 yr. fixed.

This is why I've come to really like the Option ARM. . . .something that has a
lot of flexibility and give one options payments to make each month to include
a minimum payment that is less than interest only.

Great for the lender, bad for the borrower. Back in early 80's they were
popular when prime rate was pushing 20%. I had a 14% balloon note, same
thing as interest only. Back then, it was the only way to get into a house
some times.




"DCres" <arunner[at]starpower.net> wrote in message
news:3ff1e542$0$4752$61fed72c[at]news.rcn.com...
- quote -

We've got an interest-only as our SECOND mortgage, fully intending to
pay it down (I don't know about elsewhere but in the SF Bay Area,
second mortgages are pretty much the norm). Which brings me to my
question - this is a brand new loan (new house purchase!) and we paid
off 58% of the loan in the first payment, but the monthly payment only
went down 18%. The interest rate will fluctuate slightly, of course,
but that's a big discrepancy. I am sure this is a newbie question, and
there's something fundamental I don't understand, so any advice would
be really helpful!

Thanks...

We bought a condo, but do not plan on living there the 7 years. It all
depends on if we have children in a couple of years.


"DCres" <arunner[at]starpower.net> wrote in message
news:3ff1e542$0$4752$61fed72c[at]news.rcn.com...
- quote -

In article <3ff1e542$0$4752$61fed72c[at]news.rcn.com> , DCres
<arunner[at]starpower.net> wrote:

- quote -

Advantage - lower monthly payments than a conventional mortgage.

Disadvantage - you never pay down the principal, and owe just as much
at the end as when you started. Sort of like renting the loan.

The only people who should consider this are those that are going
to trade houses within a matter of months, perhaps up to 18 months.
And given closing costs, it would probably be better to rent during
that period of time than to buy.

Long-term, this is one sure route to financial disaster by allowing
one to buy much more house than what they can afford.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

One advantage is that you have low mandatory payments. However, remember that
you will owe all the principal in one giant lump sum at the end of the loan if
you didn't pay it off during the life of the loan. If you have the self
discipline to pay down the principal before then, you'll be fine. Otherwise
make sure you have a big chunk of change in your bank account at the end.

What are the advantages and disadvantages of an interest only mortgage? My
fiance and I are considering a 7/1 ARM - interest only and would have very
low mortgage payments.