Mortgage Handbook

Interest-Only Mortgages

Interest-only home and commercial mortgages allow borrowers to take possession of a piece of property, without paying down the balance of their mortgage for a set period of time.

In North America, these mortgages usually allow the buyer to pay only interest on the loan for a period of five or ten years, after which he or she will need to begin making larger payments towards the principle. Although this is a good arrangement for those expecting their incomes to increase over time, it can be risky in the short term, especially in a declining or unpredictable real estate market.