Interest-Only Mortgage

A mortgage that requires monthly payments of interest only. The interest only option usually lasts for a specified period, like 5 or 10 years. Larger payments may also be made at the borrower’s discretion.

If the borrower pays interest-only during the interest-only option period, no principal will be repaid. The loan balance will remain unchanged.

Interest-Only Mortgage Suitability

An Interest-Only Mortgage is for disciplined borrowers who have a valid use for a lower initial required payment such as:

  • Flexible income requiring flexible payments
  • Buying more house and paying interest-only until income increases
  • Investing the cash flow for greater growth potential
  • Turning property quickly to increase capital gains
  • Managing cash flow to pay-down a second mortgage or higher rate loans
  • Reducing the monthly payment after extra principal payments are made