What is an interest-only mortgage?
Honestly, these things strike me as being a trap. One of the reasons for buying a home is so that you will no longer have to pay for it at some point. You’re investing all your money in your property rather than remaining tied to your bank forever. And when you sell your home you’ll get your money back. With an interest only loan, that won’t happen. So I think they’re a bad idea. But that’s just my opinion. Here’s an actual explanation which may help you understand it: A mortgage is “interest only” if the scheduled monthly mortgage payment – the payment the borrower is required to make –consists of interest only. The option to pay interest only lasts for a specified period, usually 5 to 10 years. Borrowers have the right to pay more than interest if they want to. If the borrower exercises the interest-only option every month during the interest-only period, the payment will not include any repayment of principal. The result is that the loan balance will remain unchanged. For example,
