Interest Only Mortgages for the Wealthy Investor

It is for these types of investors that the interest only mortgage options should be used. The borrowers are business people, with business plans,and enough knowledge about the workings of commercial and mortgage loans, tounderstand a good investment from a bad. The commercial mortgage industry is a huge market, and since most of themonies borrowed exceed the $100,000.00 amount, the international bank rates, orLIBOR, are used for determining the commercial mortgage rates. 

Wealthy investor usually means successful investor. These investors are very educated in the investment process, be it realestate or stocks, they understand the risks they're taking, and how to maximizethe risk for the profit. The real estateinvestor and the interest only mortgage are a perfect pairing. The real estate investor looking to retain aninvestment for short term can really benefit from the lowered capitalinvestment of the principal payment. Especially in a situation where the investor is improving the propertyand the value is certain to increase.

Many of theconsumers, who are being offered these interest only loans, are not businesspeople; they're not wealthy investors looking for a way to invest excess capital. They're simply consumers looking for a placeto live. 

The investor normally has an investment analyst at his or her disposal, with toolsand resources that can determine a good investment, the risk involved, andmeasure it against the amount of risk the investor is willing to take. All these factors go into determining if aninvestment is a buy or sell. Thisparticular borrower fully understands the risks involved in an interest onlymortgage, and has spent the time needed to determine if the product is rightfor his investment needs. The realestate investor is a business person, not a consumer borrowing to pay for aplace to live

When youcompare this with the consumer buy or sell, you're not even comparing apples toapples. 

Some investment opportunities for the wealth-building investor will at some pointrequire an additional amount of monies to turn the investment into a profitablesituation; do you suppose the average consumer has another ten or fifteenthousand dollars at their disposal, in case the interest only option shouldbecome a problem, or they're home should need unexpected repairs, in order toremain at the purchase value? Mostlikely, the answer here would be no.

Theshort-term real estate investor or developer wants to keep his or herexpenditures at a minimum during this investment period, saving as much of theexpendable cash as possible for the actual renovation or preparation for saleof the property itself.

The lessmoney spent on mortgage payments, or in the investor's eyes, investmentexpense, the more money there is to actively and aggressively pursue potentialbuyers and increase the value of the property. This is good business, and good business is based on sound businessdecisions.

It is here that every consumer needs to stop and reevaluate their borrowing situationagainst that of the investor. The wealth-building investor is a businessperson. Their livelihood depends ontheir knowledge of the product they market, in this case real estate. Normally, a business person is not going totake a risk with their personal investments; not like the risks they will takewith a business investment. Why? Because the home they share with their familyis much more important than a business deal, most are not willing to risk losingtheir home.

Istill am not an advocate of the interest only mortgages, but for somesituations they are the best option. Ina business setting, when many factors have been thoroughly discussed, and theinterest only option has proven itself to be the best choice, I think the interestonly mortgage should be used. But this option should remain as the knowledge ofLIBOR is among the masses, virtually unknown.