What Is an Interest-only Mortgage? | LowerMyBills

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00:00 Introduction
00:30 Traditional Mortgages
1:30 Interest-Only Mortgages
2:37 Potential Risk
3:11 Reasons To Have An Interest-Only Mortgage
4:25 Traditional vs. Interest-Only
5:56 Pros & Cons
7:46 Closing

An interest-only mortgage is a nonconforming loan where the borrower can pay only the mortgage interest for an initial period. Nonconforming loans don’t adhere to the rules set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that back conforming loans. That’s why the features and requirements of interest-only mortgages can vary widely.

Of course, borrowers must repay the principal balance on an interest-only mortgage. But repayment isn’t expected until after the interest-only period ends.

Featuring Avery Heilbron, Financial Educator
 
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