What are the benefits of a Interest Only Mortgage that turns to regular mortgage after 10 years?
Lower payments because you are not reducing the principal at all during the first 10 years unless you make extra payments. Your entire house payment could be tax deductable because it is all going to interest. Ask your tax advisor, since there are rules about how much can be deducted. CAUTIONS: You may not be in the home for a full ten years, or you might refinance for other reasons. If so, you need to understand that the amount of principal left on the loan may be close to what you can sell it for or appraise it for, which means the cost of the sale (commissions, etc.) would have to come out of your pocket.There are many benefits, but I am not advocating that you do it unless you truly understand that you are not paying down the principal, and if the market you are in slows, you might not have the appreciation you are counting on.
