Why would you ever get an interest only mortgage?

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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

35 Answers

Anonymous 0 Comments

To add to some of the points already made, IO loans are a popular option with investors as well.

Say you are looking to buy an investment property and rent it out. The purchase price is $100k and you secure it with an IO loan. You can set rent for your tenants to cover the IO payment or even more if you want. 5 years down the line the value of the home is up 50% and you sell for $150k. You just made $50k while someone else made all the payments.

Oversimplification as there are more costs to ownership, down payments, and all that fun stuff but that’s a basic breakdown of why you might get an IO loan on an investment property.

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