Twenty-seven-year-old Jo Lynn Rosemas is looking to buy a home. With rising real estate prices its tough, but she may have found a way.
Jo Lynn says, "The houses out there now that I've been looking at I can't afford because they’re so much and you can't get enough home, but with an interest only loan, I can get a bigger house, more yard, more square footage, all that stuff."
Locally, interest only loans have become the preferred method of financing. According to Loan Performance, five percent of Panama City home buyers chose interest only loans in 2001. That number jumped to 60 percent in 2004.
Compare that to Fort Walton Beach where 1.9 percent of buyers chose the interest only option in 2001, to a whopping 71 percent in 2004, but experts say these loans aren't for everyone.
Jim Dake, a mortgage broker, says, "They need to be aware of the fact the when that interest only period comes up, their payment could go up considerably and that there could create a lot of payment shock."
Also, you're betting your home will appreciate to cover the higher cost of paying back the loan, but for someone not planning on staying long-term, they might worry about committing to a fixed rate mortgage.
"I'm not sure if I'm going to be her for 30 years. Probably not, probably five at the most."
It is why no-interest makes sense for Jo Lynn and so many others.
Experts say much of the interest only loans are due to speculators who buy and sell condos, often before they're even built.