Borrowers are turning to interest-only mortgages so they can invest the cash elsewhere
Affluent borrowers are signing up for the same type of mortgage that pushed many homeowners into foreclosure just a few years ago.
Interest-only mortgages, in which borrowers pay interest but no principal during the first few years of the loan, are attracting buyers who like the lower monthly payments—and can divert the savings to income-generating investments.
An interest-only mortgage may have lower monthly payments.Lenders say these borrowers are attracted to the loans’ low monthly payments, which can be 30% to 40% lower than regular mortgages. And with interest rates near record lows over the past year, these loans have become even cheaper.
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