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
You are missing one important thing: inflation.
Every dollar you pay on the mortgage principle today will be worth less tomorrow. You can pay off a 300.000 dollar mortgage over 30 years, but by the end of it that 300.000 dollars might be the price of a midsize family van instead of a house.
Obviously, not paying down the principle has a cost too since the interest stays high, but it could be worth calculating which approach is best financially.
Latest Answers