Lisa Epstein obviously knows very little about home mortgages. Paying an interest only loan for 10yrs in NO WAY puts you in risk of foreclosure. The number of propreties nationwide that have declined in value over the last 10yrs is less than 1%. So if you keep the loan for 10yrs you will not be paying down principal for that time, but your property should be increasing in value even if it is just slight, and also you are saving in monthly cash flow so you can build liquid accounts. Furthermore, you can always pay down principal if you chose every month. This article makes no sense, and this is coming from someone who thinks Quicken is one of the worst in the industry. Good work Lisa.

Lisa,
If someone purchased a home for $400,000 and it is now worth $200,000 then the loan would not be at fault for the foreclosure, but rather the uninformed purchaser of the home. Even if that person had been paying a principal and interest 30yr. fixed loan they would still be "up-side down" on the property being that you pay down very little principal in the first ten years. If someone did purchase during a real estate bubble that burst, holding on to the property for an extended period of time would probably have no benefit. You do have the option for short sale or foreclosing, both will ruin your credit for awhile. The problem I had with this article is that there are a lot of loans out there that are dangerous to consumers, but a 30yr fixed rate where the first 10yrs give you the option of interest only payment poses no threat to a borrower. The key things to look for would be negative amortization or short term fixed loans which were attributed to "sub-prime borrowers" or people with below average credit. That would be a 2 or 3 yr fixed loan with a pre-payment penalty to match. The 10yr. interest only loan is very safe as long as people understand what they are signing up for.

Lita,
If you could call 10yrs a "teaser period" I guess this would seem like a risk. If you are aware of a payment change then you should either make sure your income can support this, or refinance at that point in time. 10yrs is such a long term to call a teaser. You would end up wasting more money by taking a much higher rate on a 30yr. fixed rather than the 10yr fix. This is an extremely conservative point of view and I don't think the general consumer should be alarmed of a payment that will not change for 10yrs. People should be using the equity in their homes to provide cash flow and liquidity, not dumping hundreds of extra dollars every month into their home, and especially not only taking a fixed mortgage because of fear that your payment will change in 10yrs. Talk to someone who strictly works in mortgage and go over your financial plan for the next 2yrs, 5yrs, 10yrs, and 30yrs, and make sure your mortgage is best suited to fit all of those needs.

Lisa,
I apologize for the mix-up.

Lita,
You keep talking about the 6.25% "teaser" and that "teaser" lasts for ten years, also the interest rate does not change on this loan it just requires a principal and interest payment. Which a consumer could have previously been paying down at their comfort level. The article you posted by Robert Schiller is good, but it is SPECULATION. There are no actual figures in the article that prove values nationwide will be lower in ten years. Any home could have a risk of losing value over ten years or could be subject to a natural disaster. If a consumer believes that the value of their home today is going to be lower ten years from now then you are right they should not get this loan, but SELL THEIR HOME IMMEDIATELY. Once again, this loan is not perfect for everyone. I would not call it a high risk loan by any stretch though. As I mentioned before you should match your mortgage to fit your current and future financial needs. A consumer who plans to only live in a home for 5 yrs, and has 20% equity which this loan would require should feel 100% safe with a loan like this.