thoughts on IO mortgages

[Vanessa Homuth]

We are planning to finance an investment property using a 7 yr ARM. Our broker inquired whether we want an interest only in first 10 yrs. The interest rate is only 0.125 higher than a traditional ARM. The IO frees up an extra $110 monthly cash flow during the 10 yr period, and improves the IRR. Should we do the IO and just refinance at year 7? Welcome any advice on how to think about this.