The biggest possible danger that any one going in for an interest-only mortgage lies in that they may certainly be tempted to borrow more than what they could realistically afford. The temptation to own a house, for example, may be so overpowering, that you may forget that interest-only mortgages are interest-only, only in name! You will have to repay the interest and the principal, over a period of time.
One comes across any ads in discrete media these days gift you the 'greatest homes' because 'you deserve them'. One could be certainly mislead by such tempting ads. But is it the reality? Are interest-only mortgage loans so attractive? You should never forget that interest-only mortgages work on confident assumptions. For example, fantasize you buy a house based on the assumption that the price of the house would remain the same even after a few years. But your assumption could go all wrong. Prices may growth and in such a scenario; you will have to pay more interest as well as principal. What if asset prices come down? In this case, you will certainly end up paying more than what you owe!
Calculate Mortgage Interest
Another possible drawback of interest-only mortgages is the fact that interest rates are bound to vary from time to time. All over the world we are finding a reduction in interest rates, primarily due to buoyant markets. But will it remain so? It is as fickle as the weather. What if we go through a depression? Once the interest rates rise, you will have to pay through the nose.
