It is generally a balloon and you have to pay if off in full or roll it over to a new loan. This is why interest only loans are a bad idea. You are building NO equity in your home, you are not paying down this loan at all. Might as well rent, because you’re not building equity.
How do you calculate future payments when your fixed term interest only mortgage runs out?
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It is generally a balloon and you have to pay if off in full or roll it over to a new loan. This is why interest only loans are a bad idea. You are building NO equity in your home, you are not paying down this loan at all. Might as well rent, because you’re not building equity.
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real estate investor
You can’t. You don’t know if you will be able to get a loan to refinance the home in the future and if you are able to, you don’t know what the interest rate will be.
Some people in the 1970s had balloon payments due in the early 1980s when mortgage interest rates were over 15%. If they didn’t qualify for a mortgage at those rates, they either had to sell the home if possible or allow the home go into foreclosure.
Although interest only and variable interest rate loans can initially reduce your payments, they can cause major problems in the future.
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Credit and mortgages can be a very difficult issue for many people. In fact, every situation is different and depends on many circumstances (not included in your question)
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