SD wrote:
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I personally would not structure my real estate investments in a way
that if I fail to earn more money in the future I will be forced to
sell or let it go to foreclosure. To me it seems to be setting yourself
up for a cascade of negative financial consequences if you, for
whatever reason, earn the same or less in the future.

Andy

I'm actually choosing this option for a new primary home I'm buying.
If it's the same option as what I chose, during the first 10 years you
can pay interest only or any amount of principal. So it gives you the
flexibility to pay a little less during the first 10 years, but if you
want to get a head start on paying down your principal, you can.

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Well in case of this new mortgage, a bigger chunk of the money is paid
in the future when the same amount of money is worth less. So in theory
it should be better. (Disclaimer - I have a similar mortgage myself)

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Well it is a reasonable bet that one earns more in the future than now.

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hanson wrote:

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I did some calculations on a spreadsheet, and oddly enough your total
interest payments are going to be almost exactly the same when
comparing between your existing mortgage and this weird alternative
mortgage you are describing. So in terms of interest expense looks like
its a wash. What I would worry about is your assumption that you will
have more cash 10 years from now; what if that turns out not to be the
case?

Andy

Say, care to mention in what part of the country you're contemplating
buying? I'm just curious but might have a little more to add, depending on
the approx. location.

We had a long thread about bubbles, with some mention of interest only
morgages, here last week. Sure, they can make sense. Depends on the numbers.
So have you run all the numbers? E.g. cost of maintenance, insurance,
property taxes, and estimated the expected appreciation of the property?

Is this a rental property or a piece of land or what all (if I may ask)?

One of my co-workers just refinanace into a Loan product that I had not
heard of before.

The loan is 10 years interest only at 5.75%. Then the loan changes
into a fixed rate mortgage for the rest of the term (20 more years at
5.75%, but you are paying principle as well). There were no closing
costs for the loan.

I have an investment property that I might like to refinance into this
loan arrangement. I do not plan to sell the property for at least 30
years. I am more in need of cash now then I will be in 10 years, when
the loan changes to a fixed rate.

My investment property is currently in a 30 year fixed rate mortgage at
6.5% with 29 years to go.

What are your thoughts on this mortgage? I know that "interest only"
is usually frowned upon for various reasons, but what your your
thoughts on this situation? Thanks.