What is an Interest Only Mortgage Payment
Traditional mortgages require that each month you pay back some of the money you borrowed plus the interest on that money. Over time, as you pay the loan the principal you owe on your mortgage decreases over the term of the loan. In contrast, an interest only payment plan allows you to pay only the interest for a specified number of years. After that, you must repay both the principal and the interest.
Many of the mortgage products that offer interest only plans come with adjustable interest rates, this means that the interest rate will change over the term of the loan affecting your monthly payment. These changes could happen as often as once per month or every 3 to 5 years, depending on the terms of your loan.
The interest only period is typically between 3 and 10 years. At which time, your monthly payment will increase even if interest rates stay the same because you must pay back the principal as well as the interest.
