Hello! I was wondering what the pros and cons are of interest only loans on small multi family properties! I know you would have a higher cash flow. What are some things people have noticed from these types of loans is it worth the risk? Thanks!
@Laramie Hiebner the pros and cons are the same whether its a small property or a large one. You are correct the Interest Only (IO) payment would be a lower payment but there are some other important items to know about. First most IO mortgages the interest rate is adjustable. So if you are planning on holding this property for a long term period you will want to take into consideration that you may not know what the payment will be in the future. Also, when qualifying for a new mortgage the lender is required to use a "worst case scenario" on your current loans to qualify you. So on an adjustable loan they will calculate the highest rate you could have. While your payment will be low your ability to qualify for other mortgages could be more difficult. Hope this helps.