Common
Questions:
Advantages and Disadvantages of the Interest
Only Mortgage
• The main advantage
of the Interest Only Mortgage is that
the initial "interest only"
portion of the loan offers borrowers very
low payments. This leaves the borrowers
with more money to use for other purposes.
• A significant
disadvantage of the loan is that you will
not build equity until you start paying
money on your principal. For more information
the Interest Only Loan and Equity, see
our Interest Only and Equity article.
• Another disadvantage
to the Interest Only Mortgage is that
your monthly payments will significantly
increase once you start paying principal
in addition to your interest (AKA, the
second portion of your term). At this
point, many people refinance to a different
type of mortgage for a lower interest
rate, or sell their home.
