What happens after the interest-only period?
Interest-only payments are for the first ten years. After this the loan limit will begin to decrease at 1/240th per month and borrowers may have to make principal payments to comply with it. How that will affect their monthly balance depends on their loan balance in relation to their credit limit at that time. Here’s what actually happens: After the first ten years, the credit line will be reduced each month by 1/240th (the number of months left on the loan at the end of the 10-year interest-only period). If the balance is higher than each month’s new credit limit, the borrower must pay the difference in addition to the interest. But, if they have paid ahead on their loan balance, they will continue to pay interest-only payments until their credit limit reaches their balance.
