QandAs: Loans

What is a Ten Year Interest Only Mortgage?

Answer:
A ten-year interest only mortgage is the most common type of interest only home loan.

Borrowers who choose a ten-year interest only loan receive a low fixed rate for a ten year period. In addition, borrowers are only required to make interest payments during this period.

Interest only payments reduce their monthly mortgage obligation. In turn, borrowers can purchase more expensive homes. Since payments will not reduce the principal balance, a borrower’s equity is subject to property appreciation. Once the ten-year interest only period ends, monthly payments adjust (increase), and the loan is fully amortized over the next twenty years.


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