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Nesgroup address: misc.invest.real-estate - Date & Time for the message: 27 Jul 2005 11:09:28 -0700 /

Author of the message: "Mike"

Title of the message:
Re: Where's the gain for a speculator with an interest-only loan?

Text of the message:
The sepculator that gets an interest-only loan with 0% down may be
depending on the house appreciating in value over the course of the
loan. If he buys a house that apreciates at a greater rate than the
interest payments on his loan, and a greater amount than his holding
costs, he'll make out O.K.
An investor might use an interest-only loan with 0% down because he
expects to make a greater income from the rental of the property than
the costs of his payments.  If he sells the house at the end of the
loan term for what he paid for it, his profit is the cashflow he was
able to generate during his ownership. Any apreciation is gravey.
A home owner might want to use an interest-only loan in order to be
able to afford the kind of property he or she would not be able to
afford otherwise when interst rates are unusually high.  When my mom
bought her current house, she got a loan at 16% and was happy to get



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