| The old adage says Haste makes Waste, and caution | | | | only mortgages have one main point. The payments |
| is your only friend. How true such a proverb is when it | | | | are pretty low during the term of the payment, but that |
| comes to the world of personal financial planning. | | | | is simply because the overall liability is never going |
| Caution means that you stop and look at all options | | | | down. Other than that, this mortgage product really |
| before making any decisions in order to ensure that | | | | shouldn't be a regular item of consideration in your |
| more often than not the result is a sound decision with | | | | financial planning portfolio. |
| a positive outcome. This step is almost mandatory | | | | The interest only mortgage offers little in the way of |
| when dealing with issues of financial planning, 401(k)s, | | | | tax deferred savings when compared to the bigger |
| and future money needs like retirement funds, etc. | | | | products like IRAs, MSAs, and even 401(k)s. Sure the |
| Poor financial decisions can result in catastrophic | | | | interest is tax deductible, but not at a one-to-one ratio. |
| consequences like late payment, a deteriorating credit | | | | Even SEPs for the self-employed individual can have a |
| rating and even bankruptcy. | | | | one-to-one ratio of tax savings. |
| When investing in real estate for short term purchases, | | | | Over the long-term financial planning picture, if you |
| one of the options you may be considering is an | | | | were to consider an interest only mortgage in |
| interest only mortgage. These can be a tricky | | | | comparison to a regularly amortized mortgage you |
| investment and so you may want to consult with your | | | | would see that when the regularly amortized loan is |
| financial advisor, before entering into a mortgage of | | | | paid out, there is still a long line of payments to be |
| this type. And, since it really can't be considered a | | | | made on the interest only loan. The amount of savings |
| piece of your investment portfolio, a will more than | | | | could be quite substantial if you consider the time value |
| likely be part of a business venture or investment. This | | | | of money. Time value is easy to understand once you |
| is where the looking at all the options really comes into | | | | learn it. The basic concept is that the dollar is worth |
| play. An interest only mortgage is not a good financing | | | | more today than it will be worth tomorrow (history |
| option when you are looking at purchasing a piece of | | | | seems to confirm this). So money put in savings today, |
| property for a long-term investment purpose or are | | | | will ultimately be worth more than money you start |
| going to claim capital gains on the property. | | | | saving in ten or fifteen years. This is why financial |
| Interest-only mortgages are for quick profit | | | | planners urge folks to plan for retirement at such an |
| transactions. You get in, and you get out. No hanging | | | | early age instead of waiting until age 35 or 40 to start |
| around in the middle. In. Out. Fast. Easy. Why do I say | | | | saving for the future. |
| that? Because interest only mortgages do not allow | | | | While an interest only mortgage may seem like a |
| for an increase in value to you, there isn't an equity | | | | viable option to you, be wary and consider all the other |
| growing measure included so you can't get more out | | | | possibilities. Chances are a reputable financial planner |
| of the transaction, really; and, your investment debt | | | | will have other options that benefit you more in the |
| never decreases. | | | | long run. |
| Short-term implications and considerations of interest | | | | |