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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (46100)	11/25/2005 8:30:42 AM
From: russwinter	Respond to of 110194

A little hard to understand, but most look like they reset interest rates every month or six months, and then readjust to reg amortization after 3 or 5 years. As the 6 month Libor plus 2% (now 6.56%) is used, just don't see the advantage over 30 year fixed, as the payments wouldn't really be much less. On a 500k mortgage, 30 year fixed at 6.375 P&I for the first year would be $37,440. On the IO, payments would be $32,800 after the teaser went away (most look quite short), but the debtor would subject himself to rate resets. I'd say this particular wormhole is closed. Am I missing anything?