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Wednesday, March 24, 2010
Interest Only Demise
Freddie Mac is no longer going to offer interest only products for loans after 6/13/2010. I expect Fannie Mae to follow Freddie’s footsteps and by Labor Day of 2010 the availability of interest only products will be slim. So if you or anyone you know wants to refinance to an interest only program, time is of the essence. It is too early to predict that interest only programs are going to be extinct but trends do suggest less availability.
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That's too bad. Great program for people who are financially responsible and can budget and plan for the future. You get an interest only loan with a lock for seven or 10 years, you can save a couple hundred dollars a month - but you have to plan for when that lock period is up.
ReplyDeleteAnonymous - I agree 100% with you. Interest only was a great program for people that knew how to use it. People could manage cash flow on their terms.
ReplyDeleteCircumstances, economy and short sightedness all contributed to poor planning after the “lock up” or fixed period ended. For the buyers who used interest only programs to stretch their borrowing power, payments became too high when the interest only period expired. This added another layer of foreclosures to the market place.
Speculation is Fannie will follow Freddie’s lead and interest only products will be more difficult to find (if not extinct) as a future financing option.