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SBD
Admiral
Joined: 19 Aug 2004
Posts: 1022
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 Posted: Tue Jun 27, 2006 4:25 pm Post subject: Interest-only loans make up half of state's lending |
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| Quote: | Interest-only loans make up half of state's lending
Amanda Fehd, afehd@tahoedailytribune.com
June 27, 2006
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With a housing market that just keeps growing in price and demand, the number of people opting for riskier, creative loans is also increasing. Traditional 30-year mortgages have been replaced by a majority of interest-only and adjustable-rate mortgages.
In California, more than half of all mortgage loans are interest-only, a seven-fold increase since 2002, according to LoanPerformance.
"It's a way of maximizing cash flow when you expect your income to increase," said Sue Reynolds, a broker for B & C Mortgage in South Shore. She said a variety of people are using them, from investors who want to turn houses over quickly, to young couples who see their income increasing in the future.
In 2002, interest-only loans accounted for 8 percent of mortgages, while in 2005 that number is now 61 percent, according to LoanPerformance. Nationwide the percentage of interest-only loans hovers at half as much: 31 percent.
While there are hundreds of options out there for interest-only loans, one thing is clear: You must pay the principle eventually, whether by selling the house or paying off the loan.
Therein lies the risk. When it comes time to pay down the loan, monthly payments will go up because the same loan amount is due, for example, in 20 years instead of 30. Also, those with adjustable interest rates will see their monthly payments increase dramatically if interest rates rise.
Some think this risk could have consequences for the housing market. People could want to sell houses when their payments increase out of their income range.
Reynolds cautioned against dire predictions.
"When someone asks what's going to happen in the future, I hand them the magic eight ball," Reynolds said, tossing her eight ball in the air. Because I don't know the future.
"I've always felt real estate should be looked at as it has been for the last 100 years, and that is a long-term investment." |
Save your money because in 2008-2009, some Californians will be able to afford houses again as these loans start to default.
SBD |
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gmez2001
PO3
Joined: 17 Aug 2004
Posts: 274
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| Posted: Wed Jun 28, 2006 12:02 pm Post subject: thanks |
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SBD; Thanks for posting this article.
The 'left coast' answer to a sustained standard living.............charge it,lease it and refinance out.
All of the explosive chemicals are in the flask--baby boomers(property tax affordability),interest only,adjustibles,competition from other states for boomers.................. 
I think Bush will hold it together but 08,09,10 ?????????
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