I'm tired of people calling interest-only loans a scam when they just don't understand the cash flow math behind them

Had a client last month turn down a $500k interest-only bridge loan for his rental portfolio because he read one Reddit thread that called them predatory, but he was losing $2,000 a month in negative cash flow by sticking with a traditional amortized loan - has anyone else seen borrowers get scared off by bad advice they found online?

3 comments

3 Comments

morgan.logan6h ago

Wait, he was losing $2,000 every month just because he listened to some random people online? That's a heck of a lot of money to leave on the table because of a few loud voices who probably never ran the numbers themselves. I've seen similar situations where borrowers get spooked by horror stories about interest-only loans from folks who don't understand they're a tool for short-term cash flow, not some lifetime trap. It's frustrating because most of those Reddit threads mix up bad situations where someone took out a 30-year interest-only mortgage with no plan and a perfectly sensible short-term bridge loan.

charlie_ellis3h ago

Those Reddit threads are wild, I once saw someone argue you should never pay off debt because it hurts your credit utilization ratio.

annas871h ago

That "never pay off debt" advice is exactly the kind of thing that sounds clever but falls apart when you think about it for two seconds. I wonder how many people are out there paying extra interest just to keep a number on a screen looking nice.