Interest-Only Loans

An Interest-Only Loan allows you to pay only the interest on your mortgage for a specified period, typically 5–10 years. This can make your monthly payments significantly lower during the initial phase of the loan. This is an appealing option for buyers who have a limited budget upfront or those who expect their financial situation to improve in the future. Interest-only loans are typically available for adjustable-rate mortgages, but they can also come in fixed-rate terms.

After the interest-only period ends, the loan will convert to a standard repayment schedule, where both principal and interest are paid. While this type of mortgage can save you money in the short term, it’s important to understand that the principal balance will not decrease during the interest-only phase. This means you could end up paying more in the long run, especially if the value of your property does not increase as expected.