[dangereouslysweet]

I recently took a construction loan to build my new home. As per the deal with my bank until I moved in to my house and got my permanent occupancy permit I would do an "interest only" payment, which I did for the first 4 months. Now with the economy meltdown, I am planning to refinance (go w/another bank). Although I will get a good (lower) interest rate, and only then will I re-finance, will I not be losing all the money I gave to my previous bank as an "interest only" payment??

[Home Loans by CAL]

Yes, since you only paid the Interest and nothing toward Principal. Keep in mind too, when you do switch, you will be paying additional closing costs to get the new loan. It might be in your best interest to continue with the loan you have and then find your best deal when you convert it to a permanent loan after construction is completed. That way you will only have to pay closing costs one more time instead of two. Either way, your interest only payments are not bringing your principal down at all.