Interest Only Non Recourse Mortgage

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Topic Author
texasfight
Posts: 75
Joined: Mon Jul 27, 2020 3:12 pm

Interest Only Non Recourse Mortgage

Post by 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
Posts: 679
Joined: Sat Jun 13, 2020 10:08 pm

Re: Interest Only Non Recourse Mortgage

Post by RocketShipTech »

You would lose your down payment and the chance to get another mortgage for several years.
foo.c
Posts: 110
Joined: Sat Jul 15, 2017 4:55 pm

Re: Interest Only Non Recourse Mortgage

Post by foo.c »

Your credit rating will tank.
dimdum
Posts: 216
Joined: Fri Mar 04, 2011 2:50 pm

Re: Interest Only Non Recourse Mortgage

Post by dimdum »

Also interest only loan require higher down payments, typically 25-30% down.
Topic Author
texasfight
Posts: 75
Joined: Mon Jul 27, 2020 3:12 pm

Re: Interest Only Non Recourse Mortgage

Post by texasfight »

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

Thanks for the answers. I was thinking of a no down payment, interest only loan.
softwaregeek
Posts: 597
Joined: Wed May 08, 2019 8:59 pm

Re: Interest Only Non Recourse Mortgage

Post by 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.
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Nate79
Posts: 6721
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Interest Only Non Recourse Mortgage

Post by 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
Posts: 3816
Joined: Mon Aug 22, 2016 3:22 pm

Re: Interest Only Non Recourse Mortgage

Post by runner3081 »

foo.c wrote: Tue Aug 04, 2020 7:35 pm 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
Posts: 76
Joined: Tue Jul 16, 2019 8:55 pm

Re: Interest Only Non Recourse Mortgage

Post by 60B4E24B »

softwaregeek wrote: Tue Aug 04, 2020 8:44 pm 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
Posts: 657
Joined: Wed Dec 27, 2017 2:02 pm
Location: Florida

Re: Interest Only Non Recourse Mortgage

Post by 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
Posts: 114
Joined: Sun Aug 26, 2018 8:26 pm

Re: Interest Only Non Recourse Mortgage

Post by averagelonghorn »

RocketShipTech wrote: Tue Aug 04, 2020 7:19 pm 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.
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