From what I understand about mortgages, which isn’t a lot at all, I just don’t see any scenario where an interest only mortgage is a good idea.
You pay it off for let’s say 20 years and you still have the full balance remaining. What am I missing?
In: Economics
It used to be very beneficial in The Netherlands, where the paid interest on your mortgage could be deducted from your income. A high mortgage the entire 30 years meant the most tax deduction. It was normally combined with a savings account, which would, in those same 30 years, save up the same amount of the mortgage.
Sadly, this construction is now not allowed any more.
If your scenario would still exist, it would definitely be valuable, even today. A mortgage of 200.000 now is NOT the same amount as 200.000 in 30 years, simply due to inflation. If inlfation is a not-impossible 3% for 30 years, that 200.000 would have to be more than 470.000 to have the same value. So, your mortgage effectively has shrunk by more than 50% in actual value!
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