Designed so borrowers pay only the interest owed on the loan each month. This option lasts for a fixed term between 5 to 10 years. Each monthly payment only goes toward the interest, therefore the loan balance does not decrease unless the borrower makes additional payments toward the principal loan amount.

During this time frame, the borrower has the right to pay more than the interest payment; however, if the borrower chooses not to pay toward the principal loan amount then the loan balance remains the same.

Benefits

  • Lower monthly mortgage payment

  • Additional cash available to pay toward higher-interest debts

  • Greater control over cash flow

  • The entire monthly payment during the interest-only period usually qualifies as tax-deductible.

  • Helps to keep costs low so that funds are available to be leveraged in other areas in the case of short-term investment properties such as fixer-uppers.