Tuesday, September 8, 2009
This is about I/O loans in the US, As far as I know the Central Bank do not give any info on I/O loans here.
Edward and Maria Moller are worried about losing their house — not now, but in 2013.
That is when the suburban San Diego schoolteachers will see their mortgage payments jump, most likely beyond their ability to pay.
Like millions of buyers during the boom, the Mollers leveraged their way into a house they could not otherwise afford by taking out a loan that required them to make only interest payments at first, putting off payments on the principal for several years.
It was a “buy now, pay later” strategy on a grand scale, meant for a market where home prices went only up, and now the bill is starting to come due.
With many of these homes under water — worth less than the loans against them — many interest-only mortgages will soon become unaffordable, as the homeowners have to actually start paying principal. Monthly payments can jump by as much as 75 percent.
The Mollers owe so much more than their house is worth, and have so few options, that they are already anticipating doom.
New York Times
Posted by Southofdub at 9:08 PM