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Interest Only Mortgages

Interest-only mortgages allow borrowers to pay only the interest for a set period, reducing initial monthly payments.

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An Interest-Only Mortgage is a home loan where borrowers pay only the interest on the principal amount for a specified initial period, typically 5 to 10 years. After this period, they start repaying both principal and interest.


Generally available to borrowers with good credit, these mortgages can suit those with irregular income or expecting significant future earnings.

  1. Lower Initial Payments: Monthly payments during the interest-only period are lower than traditional mortgages, providing short-term financial relief.

  2. Flexibility: Suited for those anticipating increased income in the future or planning to sell the property before the principal repayment begins.

  1. Initial Affordability: Ideal for individuals looking for lower initial monthly payments, freeing up funds for other financial priorities.

  2. Investment Opportunities: Borrowers may redirect funds saved during the interest-only period toward investments or home improvements.

  1. Higher Future Payments: Once the interest-only period ends, monthly payments increase significantly as borrowers start repaying both principal and interest.

  2. Potential for Negative Amortization: If home values decline, borrowers may owe more than the property is worth when principal repayment begins.

  3. Limited Equity Buildup: During the interest-only period, borrowers aren't building equity in their homes, potentially affecting future financial flexibility.

Interest-Only Mortgages provide short-term financial flexibility with lower initial payments. However, potential downsides, such as higher future payments and limited equity buildup, should be carefully considered before opting for this type of mortgage. Consulting with a financial advisor is advisable to determine suitability based on individual circumstances.

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