Interest Only Mortgages

An Interest-Only Mortgage is a type of home loan where borrowers pay only the interest for a set period—typically 5 to 10 years—before beginning to repay both the principal and interest. This option is generally available to borrowers with good credit and can be especially useful for those with variable income or expecting higher future earnings.

Benefits

• Lower Initial Payments: Monthly payments are lower during the interest-only period, easing short-term financial pressure.
• Flexibility: Suitable for borrowers who plan to sell the home or expect income growth before principal payments begin.

Pros

• Affordability Up Front: Lower initial payments free up cash for other expenses or goals.
• Investment Potential: Money saved early on can be used for investments, savings, or home upgrades.

Cons

• Payment Shock Later: Payments increase significantly once the interest-only period ends.
• Limited Equity Growth: No equity is built during the interest-only phase, which can limit future borrowing power.
• Risk of Owing More: If home values drop, borrowers could end up owing more than the home is worth.

Interest-Only Mortgages offer short-term financial relief but carry long-term risks. It's important to carefully weigh your financial outlook and speak with a mortgage advisor before choosing this loan type.