Interest only for 700K

[Avinash Tuta]

Hi had a thought  to buy a house that i want to stay for 5 to 6 years that cost over a 1M$ .
i want to sell my current home and use that money for down payment for a new home.

i want to take interest only loan for the rest of the money.

is that a good idea .please advice me .

Thanks

Avi

[Will Fraser]

Hi @Avinash Tuta,

It depends on what you mean by good idea. 

A lot of this depends on what kind of down payment you are making.  If you are putting down 50% of the value of the home then the conversation is quite different than if you are putting down 15%

In general, the problem with Interest Only over such a long period of time is that you eliminate one of the safest features of a mortgage . . . that it gets smaller over time due to principal paydown.  This safety feature is important to the bank AND you.  

If you are putting down a substantial down payment then you may find a lender who is willing to take your interest only payments for such a long time, but in general this is not an advisable strategy for your primary residence according to most financially sound advisors I know.