Interest Only Mortgages

Interest only mortgages can save you money, but you better know both sides!

An interest only mortgage is where the entire monthly payment is for interest on the loan. Usually these loans are amortized over a full 30 years with $0 going toward payment of the principal loan amount.

Advantages : This type of loan enables a borrower to purchase more home. Interest only mortgages usually start with a lower interest rate than fixed rate conventional loans.

Disadvantages : Sometimes a the local market can go down and homeowners can find themselves "upside down". A borrower may find that they need to refinance the balloon payment in 7 years and rates may be much higher causing the payment to increase.

The loans usually have a balloon payment due after 5, 7, or 10 years.

Related Article: Balloon Payments >>