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Oh the Mess that Interest-Only Mortgages are Creating

By JLP | January 9, 2006

My friend, Ben, over at the HousingBubble blog has posted an article titled One-Two Punch Awaits I/O Borrowers. This part of the article really bothers me:

Bill Callanan expects to soon be contacting clients who got into 5/1 interest-only loans in 2003 and recommending that they consider refinancing into new interest-only loans to avoid higher interest rates. ‘It’s two years later, and we’re seeing interest rates rise. Stop the bleeding now,’ he said.

I’m sure the mortgage brokers will be all too eager to “help” people refinance. I’m sure they will make a killing.

Read the article and then ponder JLP’s Point of the Day:

Stay away from interest-only mortgages!

Topics: Housing Market | 9 Comments »


9 Responses to “Oh the Mess that Interest-Only Mortgages are Creating”

  1. Jay Says:
    January 10th, 2006 at 6:42 am

    So true.

  2. rmark Says:
    January 10th, 2006 at 7:02 am

    http://www.efficientfrontier.com/ef/405/housing.htm

  3. savvy saver Says:
    January 10th, 2006 at 8:05 am

    I love Ben’s blog. It is amazing that the symptoms of a bubble (or at least a problem) that are dismissed by the media and real estate industry as happening in only a few isolated areas are happening all over.

  4. Adult ADD adn Money ( John MacKenzie) Says:
    January 10th, 2006 at 9:02 am

    Frankly I think the biggest beneficiaries of the Interest Only Loans will be the legal profession. Many people will have no choice but to file for bankruptcy, combine that with new bankruptcy laws that require debtors to climb more legal hurdles and it is a win win
    for lawyers.

  5. Hazzard Says:
    January 10th, 2006 at 6:15 pm

    I’m really worried that our friends are going to really take a bath on their interest only variable mortgage. I tried so hard to tell them that at 5.75, money was cheap and they should lock it in.
    Hazzard

  6. sam Says:
    January 11th, 2006 at 5:30 pm

    A savvy investor would wait until the bottom fell out of the market, and then pick up distressed properties at a great price. Of course, knowing when the market is bottoming out is the tough part.

  7. JLP Says:
    January 11th, 2006 at 5:41 pm

    Sam,

    That’s exactly what some people will do. That’s why the rich get richer and the poor get poorer.

  8. » This Week in Review by Blueprint for Financial Prosperity Says:
    January 13th, 2006 at 8:40 am

    […] AllThingsFinancial is getting concerned about interest only mortgages but the part that particular bothers him is how brokers are pushing people to move from one interest only mortgage to another. On the personal front, his wife and him received a Kroger 1-2-3 Rewards card that doesn’t appear to be all that appealing. […]

  9. fivecentnickel.com Says:
    January 13th, 2006 at 9:29 am

    Weekly Roundup – 01/13/06

    Happy Friday the 13th! Here are some of the best posts that I ran across over the past week.

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