So many different kinds of mortgage plans are out there because each suits a different borrower's particular needs. Asking which is the best is like walking into a shoe store and asking
"Which is your best pair of shoes?" Well, come on! Are you going jogging or dancing? Will you be wearing black or brown? Do you have wide feet or narrow? There's no one best mortgage. Your daughter's choice will depend on her income, other debts, credit rating, the value of the house she’s buying, how much she has for closing costs and down payment, how long she expects to live there and even more factors.
Her friends don’t know which is best for her, I don't, and you don’t either.
I do think, though, that "interest-only" or "optional-payment" loans are dangerous. Lately they’ve been used in high-cost areas where people can't afford to buy any other way, but the homeowner can end up in trouble. Those plans don't require the borrower to pay down the loan. Sometimes the debt even increases every month. With no equity buildup, the homeowner is vulnerable if there’s a drop in income or a downward trend in sale prices.
In addition, most of those exotic plans do eventually turn into traditional mortgages, at which point the shock of a much higher payment can be devastating. |
