An interest-only mortgage can offer several advantages and disadvantages in the Boston housing market. Let's explore them in detail:

Advantages:

1. Lower initial payments: With an interest-only mortgage, borrowers have the option to pay only the interest for a specific period, typically 5 to 10 years. This can result in lower monthly payments compared to a traditional mortgage.
2. Increased cash flow: By paying less each month, borrowers may have more disposable income to allocate towards other expenses or investments.
3. Flexibility: Interest-only mortgages provide flexibility for borrowers who anticipate significant income growth in the future. They can take advantage of the lower initial payments and make larger principal payments later on.

Disadvantages:

1. No equity build-up: During the interest-only period, borrowers are not paying down the principal balance of the loan. This means that no equity is being built in the property, which could limit future options such as refinancing or accessing home equity loans.
2. Higher long-term costs: Once the interest-only period ends, borrowers will need to start paying both the principal and interest, resulting in higher monthly payments. This can be a significant financial burden if the borrower is not prepared for the increase.
3. Market risks: The Boston housing market is subject to fluctuations. If property values decline during the interest-only period, borrowers may find themselves in a situation where they owe more on the mortgage than the property is worth, making it difficult to refinance or sell.

It's important to consider these advantages and disadvantages in the context of your specific financial situation and long-term goals. Consulting with a mortgage professional or financial advisor can provide personalized guidance.

References:

• Smith, J. (2019). The Pros and Cons of Interest-Only Mortgages. The Balance. https://www.thebalance.com/pros-and-cons-of-interest-only-mortgages-4580209
• Consumer Financial Protection Bureau. (n.d.). Interest-only mortgage payments and payment-option ARMs. https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-mortgage-payment-option-arm-en-136/