Analyzing the Interest Only Mortgage
They say haste makes waste, and I believe that itís true. I would much rather go with caution and feel safe and comfortable. One way to make sure that in your financial planning you are cautious, is to look at all of your options carefully.
One of the options that you do have at your disposal if real estate is your thing is an interest only mortgage. Before signing up for something like this however itís very wise to speak to a reputable financial adviser. This is more of a business venture actually than a normal investment, therefore itís strongly encouraged that you plan strategically with a trusted adviser.
An interest only mortgage is not considered a long-term investment simply because you do not build any type of asset when utilizing this type of mortgage. In other words, your principal investment (the property) never increases in value; youíre simply paying the interest portion of the mortgage.
One thing that draws many buyers into the interest only mortgage is the fact that your monthly payments are often exceptionally low, due to the fact again that youíre only applying money toward the interest portion of the loan. This is really the only short-term gain to this type of loan.
As appealing as the interest only mortgage may seem because of the low monthly payment, it really does not compare to other investments that are available to you. For instance an IRA, 401K, and an MSA are great retirement plans, which are tax deferred. Some may argue the fact that the interest of your mortgage is tax deductible, but not on the same level as the others Iíve mentioned, not even the SEP that is available to the self-employed. Their tax is deductible at a one to one ratio.
Now, one other reason that I am against the interest only mortgage, especially compared to other types of regularly amortized mortgages, is that if you paid on the two different mortgages at the same rate, at the time that you finish paying on the principal of your property on the normal mortgage, youíll still only be paying on the interest of the interest only mortgage. Itís really a lousy situation for somebody who is looking to invest his or her money wisely.
Those who end up in loans such as these are unfortunately the same people who very often, after much poor financial planning, end up in a bankruptcy court.
Being cautious is a great trait to have for a person wanting to increase their investment portfolio. Though the interest only mortgage may very well be tempting at first glance, after looking at all sides, it simply probably is not the best option available to you.
Being very excited about credit consolidation, Johnathan Bakers is writing quite some web pages on this specific subject. You might discover his work on negotiate debt settlement and credit consolidation (www.debtania.com/negotiatesettlement.html) at www.debtania.com.
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