interest only loan vs. traditional mortgage?
PLEASE READ CAREFULLY BEFORE ANSWERING:
For long term OR for short term… A loan salesman told me an interest only loan is better than a traditional one.
He said that if I take the difference in payments (interest only being cheaper; monthly) and add that to my payment, I’ll have paid off more in principal in 5 years.
i.e. $ 2K a month interest only vs $ 3K a month traditional. Take that $ 1K a month in difference and USE IT … apply it to paying down the principal on the interest only… and in 5 years I will have paid off more principal on the home than with a traditional mortgage. And I could refinance/sell/whatever and be in a better financial position.
So, after 5 years with interest only, paying an aditional $ 1K a month for principal, I will have paid off $ 60,000 of principal.
Even if I refinance, the loan amount will be $ 60K less, therefore, a lower monthly payment.
***YOURE ANSWER SHOULD FIND THE PROBLEM WITH THE LOGIC***