If home values continue to rise in the state (as they generally have been), loans like interest-only and pay-option ARMs may be good options for second-home buyers, Mr. Schneider says. However, if housing prices come down, or if you always make the lowest payments permissible, it's possible to end up owing more on a house than you bought it for under many pay-option ARM formats. Interest-only borrowers, like buyers of primary homes, sometimes run into trouble when they have to start paying the higher combined mortgage payments for both principal and interest.
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