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.

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