Interest and Mortgages
WAV | MP3 | Real
Chuck Denney
Interest only and adjustable rate mortgages have become as hot as the housing boom in some areas.
An interest only mortgage allows the borrower to pay only the interest on the total bill for a specified period of time, usually five to ten years.
The monthly payment contains no principal.
Interest only loans and those with adjustable rates do allow home buyers lower monthly payments, but is this a good idea?
Dr. Dena Wise
My recommendation is a fixed rate if at all possible.
Chuck Denney
Dr. Dena Wise is a consumer specialist with UT Extension.
She says a potential concern here is that these payment options may tempt people to buy more house than they can realistically afford.
Dr. Dena Wise
You are dependant on your property increasing in value to gain equity in that mortgage. But you also have to understand that if your property decreases in value then you will have lost money, and you will owe more money than that house is actually worth.
Chuck Denney
Dr. Wise’s advice – understand completely all aspects of your mortgage before agreeing to a payment plan and interest rate.
Dr. Dena Wise
You have to be really careful when you’re looking at an interest only or balloon mortgage and know exactly what your terms are.
Chuck Denney
This type of mortgage has been around since the 1920's, but only recently has it become so commonplace.
Interest only loans made up less than two percent of all mortgages in 2001.
In 2004, it was more than thirty percent.
This is Chuck Denney reporting.
END
|
