Life happens and things take longer than expected, rates fluctuate, bank become more conservative, so it is good to be covered for a little longer.With prepayment penalties you have to do the math and make sure you can live with the penalty in various scenarios.

Still seems extremely high for the property values and like it fluctuates often and between neighborhoods.

Your valuation does change along with your NOI, @Scott Kimberly, and cap rates fluctuate, too.

Have you seen any fluctuation of the vacancy in different seasons? 

Keep in mind that rental market fluctuates so you can't always assume that rental income with increase year-over-year.Agree that it's becoming increasingly difficult to find value in towns near Boston, but if you continue to search there are nuggets that show up.

Your mortgage would remain untouched and you would have a HELOC that usually is some rate + prime, so it can fluctuate over time.

as far as the risk involved with IO loans - apart of potential fluctuating values (which i dont foresee it it dropping even close to 40% anyhow) what other risks i am facing here?

Those numbers are where the market is currently at in the area as with anything I'm sure that fluctuates.

The house is a couple hours away from where I live so I first looked up the sale/purchase history of the property and saw that there has been a HUGE range of fluctuations in its sale/purchase price in the past, I can't quite tell what's been going on.

Smaller has higher occupancy, less rate fluctuation; bigger has a lot more rate fluctuation AND occupancy fluctuation, but you make bank in the high season and in the 4+BR space your ROI is typically better than the smaller ones that are more consistent.