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Originally Posted by aceventura3
Interest only products need to be put into perspective.
On a 30 year $300,000 mortgage @7% the payment is $1995 of which $250 goes toward principle reduction in the first year per month. The same at 6% is a $1798 payment of which about $298 goes toward principle in the first year per month. Unless you buy at the worst time in the worst market real estate appreciates.
According to this article (GOOGLE search: 'Average car payment') the average car payment is $378.
http://www.finalcall.com/artman/publ...cle_2267.shtml
Interest only can make the difference between a person being able to buy a home and start building financial security, they may be risking about $300/month in the example above. Some will say this is risky and unwise. I don't. If that same person buys a new car and finances it they are going to pay on average $378/month and some will compliment that person on his shinny new ride while they don't really own anything and have no networth. 
Do you really believe interest only loans are that risky or is it just hype. |
Are trying to convince me or you? Real numbers aren't hype by the way. Depending what local market you're in, one has the potential to get severly reamed in the ass by these products.
You mean to tell me that a fixed only period of say, 3 years with forewarning that rates will rise when that period is over and it's just a question of how much your payment will rise is not risky? And I don't see what the average car payment has to do with any of this. One doesn't normally live in their car. Sounds like apples and oranges to me. There are people out there who have interest only loans in the neighborhood of 3-4% for their fixed rate periods. I know because they were offered to me when I was shopping two years ago. I turned them down like they were the plague they are. With the rates creeping beyond 6% now, they're looking at doubling the amount of interest that they have to pay which will increase their payment substantially.
That's not risky? Depending on your specific situation, you can risk a lot more than $300.