The Interest Only Mortgage Payment

In the recent red hot real estate market, a number of innovative loans came on the market to provide the fuel necessary to keep sales rolling. The interest only mortgage was one such loan. By paying the interest only each month, borrowers were able to squeeze into homes they had no business trying to buy. Well, the chicken has come home to roost. These same buyers are finding their interest only period ending on the loan and their monthly payment doubling or tripling. If their payments are not going up, they are facing a negative amortization situation. While they are meeting monthly interest obligations, the value of the home is now less than the amount due on the loan! Avoid this loans unless you have an objective exit strategy.