Mortgages include monthly payments consisting of interest and principal. With the interest only mortgage, the borrower is given the option to pay interest only for a designated period of time, normally 5 to 10 years; however, borrowers have the right to pay more than interest if they would like. Interest only mortgages attract borrowers who have a valid use for a lower initial required payment. Borrowers must be prepared, after the initial period, to deal with the consequences of a higher monthly payment.

Benefits of Interest Only Mortgages

• Borrowers are given more flexibility with the payment.
• Borrowers may be eligible to purchase a more expensive home.
• Borrowers can invest the excess cash not needed immediately for principal payment.
• The interest only mortgage allows for quicker capital gain by allowing borrowers to qualify for a larger loan amount through lower required initial monthly payments.
• Borrowers can allocate excess cash into a second mortgage.
• Monthly payments may decrease in response to extra payment the month prior.