Interest Only Non Recourse Mortgage

[texasfight]

I am curious,

Say I could buy a house and rent it to my roomates to make more than the payment, but I was worried about property values in the area dropping and being stuck with it. So what if you got an interest only non recourse loan so you can walk away if the property value were to drop and give it to the bank. What is there to lose?

[RocketShipTech]

You would lose your down payment and the chance to get another mortgage for several years.

[foo.c]

Your credit rating will tank.

[dimdum]

Also interest only loan require higher down payments, typically 25-30% down.

[texasfight]

So you're telling me it isn't an awesome risk free return

Thanks for the answers. I was thinking of a no down payment, interest only loan.

[softwaregeek]

That being said, interest only mortgages are surprisingly cheap now. Even if you do need a down payment.

The traditional mortgage at under 3% tax deductible with 20% down is incredibly cheap and couldn’t exist without government guarantees.

[Nate79]

Only a few states are non recourse and even some of those the rules are tricky and have changed over time. I would not rely on non recourse even in a friendly state except as nuclear option.

[runner3081]

Your credit rating will tank.

If that is the only delinquency/late payment, they don't drop that much and bounce right back up in 5-6 years.

[60B4E24B]

That being said, interest only mortgages are surprisingly cheap now. Even if you do need a down payment.

The traditional mortgage at under 3% tax deductible with 20% down is incredibly cheap and couldn’t exist without government guarantees.

TCJA makes it much harder to see tax benefits for owning. The doubled standard deduction, SALT cap, and lowered MID cap mean a) a much narrower range of filers benefit, and b) those that do benefit less.

[Golf maniac]

Is there even a no down payment, interest only mortgage loan out there right now? That would be a shame after what we went through in 2006 to 2009. Also, a foreclosure is more than a late payment on your credit report. Non recourse just means they can’t come after your other assets with a judgement after foreclosure. It still amazes me that people are looking for someone else to cover the losses on their investments while they reap the gain. That other person is usually the tax payers.

[averagelonghorn]

You would lose your down payment and the chance to get another mortgage for several years.

AND you'd probably run into trouble renting, too for several years. And where you can rent will want higher security deposits and probably more advanced rent; and probably won't be as nice as places you can qualify for with good credit. You'll also have trouble getting decent credit card deals. And low credit score might effect your ability to get some jobs, or good insurance rates.

Plenty of people do well buying a place and having roommates, but it does come with risk.... might be worth it, might not be; but I'd say walking away from a mortgage is an extreme decision with years of consequences, so don't go in thinking you have an easy escape hatch.