What is an "interest-only" loan?
An interest-only mortgage is a loan with scheduled payments that require you to pay only the interest for a specified amount of time. The amount that you owe on the loan does not go down with each payment. Once the interest-only period ends, you may have several options:
- Paying off the loan balance all at once
- Refinancing the mortgage loan, if refinancing is available
- Beginning to pay off the balance in monthly payments, which are higher than the interest-only payments