What’s an interest-only mortgage?
With an interest-only mortgage, you pay only the interest on the loan (not the principal) for an initial period of time — often three, five, seven or 10 years. This means that during this period, your payment will be lower than a standard mortgage where you are paying both interest and principal. This allows you to maintain more cash flow with small payments or get a larger loan with affordable payments. However, after the initial interest-only period, your payments will increase substantially, or you’ll need to pay off the entire principal in a balloon payment.
