More Homebuyers Gambling with 'Interest-only Mortgages'

A formerly fringe mortgage product that allows people to move into properties that they would be otherwise unable to afford is becoming so popular that some economists worry about its potential to harm consumers, lenders and the economy in general.

1 minute read

May 31, 2005, 12:00 PM PDT

By Michael Dudley

"More than a third of the mortgages written in the Washington area this year are a risky new kind of loan that lets borrowers pay back only the interest, delaying for years repayment of any loan principal. Economists warn that the new loans are essentially a gamble that home prices will continue to rise at a brisk pace, allowing the borrower to either sell the home at a profit or refinance before the principal payments come due. About 54 percent of home buyers in the District...Just five years ago, only about 2 percent of home-purchase loans in the Washington area involved interest-only terms."

Thanks to Michael Dudley

Read the full story: Many Buyers Opt for Risky Mortgages

Saturday, May 28, 2005 in The Washington Post

Housing United States

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