Interest-Only Loan

What is an Interest-only Loan?

Unlike other home loans, an interest only loan lets you pay only the interest on your mortgage for the first five or ten years, usually the term of the loan. Many homeowners like the option of making interest-only payments and using the extra money as they please – saving for retirement, paying for college tuition, or making home improvements. Interest only loans can be a great fit for some borrowers because these loans let you leverage your savings in a variety of ways.

An interest-only loan gives you the option of paying just the interest or the interest plus a portion of the principal in any given month. By only paying the interest on an interest-only mortgage, a homeowner can invest or save the money that would otherwise go toward paying down the principal.

The Benefits:

• A flexible payment amount lets you control your cash flow in any given month.
• A lower monthly mortgage payment than a loan with a conventional interest plus principal payment.
• The additional cash you save each month from making interest-only payments can be invested – potentially bringing a higher rate of return.
• A good option for people who expect to be in their homes for a shorter period of time and may need ready access to capital.