Then I spoke to a friend who just bought a new house and got an 11 year interest only balloon at $2.5% and I wondered. If you have the cash to pay off the propety if rates are high in 11 years, isn't this a great deal? It's about half the carrying cost of a conventional loan? Alternatively, what about a 5/1 ARM, currently costing 3.25% and capped at 5.25%
?
Am I missing something here? (I guess the fact that if rates go up, I'd be making out like a bandit if I DIDN't have to pay off a balloon.....but otherwise....)