I’m looking to make an offer on a house at the top of my budget this weekend. It’s a beautiful home and I’m super excited about this one – been seriously looking for about a year.
Was mostly running numbers based off a 30 year fixed rate at about 2.65%, but recently started thinking about an interest only mortgage for 3.18%. Basically pay interest only the first 10 years, then interest and principle the next 20 years.
The pros: This keeps mortgage payments low the first 10 years and I’d probably live in the house less than 10 years. I live in Los Angeles, so I’d still make money on the appreciation of the property.
The cons: Obvious risk if I were to stay in the place more than 10 years, since the monthly payment will almost double once principle is owed after year 10. Slightly higher interest rate.
I’ve been leaning towards the interest only option recently, but want to make sure I know all of the risks involved.
Has anyone here had a loan set up like this??
Thanks in advance!