Interest Only HELOC??? Good or bad?

[NIcholas Hamel]

Hey guys looking to get a HELOC on an investment property. I've called numerous banks and found one that will do it but it's an interest only HELOC. This is my first time using a HELOC. Is this a good idea or no? Thanks everyone!!

Nick

[Chris Mason]

Almost all HELOCs are i/o, for the first 10 years or so. But that just defines the minimum payment, there's generally nothing preventing you from making an amortized payment if you wish. 

If you're handing out hundreds of thousands of loans to folks with below average financial literacy, i/o is a bad thing (& this is why HELOCs are harder to get than Fannie 30YF amortized).

If you are a specific borrower, and financially literate, i/o is actually a good thing (there are full doc A-paper i/o 30YF mortgages, but not from Fannie, and harder to get).

Interest only is just a tool. A hammer can club endangered baby seals, or it can be used to build something great, it depends on who it is given to and how they use it.