Interest Only Mortgage 101

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3 years ago


Personal Finance Terms 101: Interest-Only Mortgage

When it comes time for example to buy a house, there can be many terms that are thrown out at you that you may have never heard before. This can get a little bit scary and overwhelming but where here to simplify these terms for you. So, once you understand what a mortgage is the next step is to understand and Interest-only mortgage.


So, what is an interest only mortgage? Well, it’s a type of mortgage in which the mortgagor is only required to pay off the interest that arises from the principal that is borrowed. Because only the interest is being paid off, the interest payments remain fairly constant throughout the term of the mortgage.

However, interest-only mortgages do not last forever, meaning that the mortgagor will need to pay off the principal of the loan eventually. For example, interest-only mortgages can be useful for first-time homebuyers because it allows young people to defer large payments until their incomes grow. For more on interest-nly mortgages check out the video above.