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What Exactly Is An Interest Only Home Loan?

An interest-only loan is one that gives you the option of paying just the interest or the interest and as much principal as you want in any given month during an initial period of time. Interest only loans can be 30-year fixed-rate mortgages or adjustable-rate mortgages.

If you choose to make the interest-only payment, your monthly payment will be lower than it would be with an interest and principal payment. Your interest rate may or may not be lower than a traditional mortgage, but you will have the option of flexible payments. Interest-only loans allow you to control your payment amount and your cash flow in any given month during the interest only period.