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Interest only mortgages are really not that much less expensive per month than a declining balance mortgage. The interest only would be in our example of 6% and $100,000 loan amount $500 a month. A declining balance mortgage for 30 years would be $600 a month. Over the course of the thirty years, the individual would have paid out $180,000 in payments and have 0 equity. The declining payment would have paid $216,000 total but own the property free and clear.
The banks being "flexible" of course works to their advantage. If the individual defaults, there is always foreclosure. Our guidelines were constructed to reduce the potential that the individual "bit off more than they could chew".
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Bob S. former owner of a 1984 silver 944
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