The answer comes down to what your plans are. If you think you will live in that house for more than 5 years, a fixed rate may be the way to go. However, even though the Real Estate market is soft, appreciation should be at least 3% per year. Therefore, with an interest only, you can save a few hundred dollars on your payment per month while gaining money in equity.
Also, for the first few years, even though the payment is fixed, you are only paying something like $200 per month in principle. That means that you are not paying down your mortgage, but your payment is still high.
Bottom line, if you see yourself upgrading on the home in a few years, save the money and go with an interest only.
Multiple Property owner
· 1 decade ago