Ask Money

Interest-Only Mortgages–No

Chris Farrell Mar 21, 2008

Question: My husband and I recently attended a workshop on optimizing real estate assets. The program presented information on how to create a debt and cash flow management strategy, optimizing real estate assets to build wealth. In other words, they recommend taking the asset of your home, and have that money work for you to build income. One of their recommendations is to obtain an interest-only loan, which will allow you to take greater tax benefits and spread your mortgage over the longest term so that you can invest money that you would put towards a shorter term (15 yr vs 30 yr.) What do you think of this idea? Thanks, Susan, Boulder, CO

Answer: No. No. No. It’s by following financial advice like this that a number of homeowners have fallen into dire financial straits. Interest-only mortgages are highly risky. Stripping out the equity in your home to invest in other (risky) assets is very hazardous to your wealth.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.