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An interest only loan is a type of mortgage loan that only calculates the monthly interest payment on the principal balance. No principal reduction is made.
Dangerous for borrowers who don’t realize their loan will convert to principal and interest at the end of fixed term resulting in high mortgage payment or the loan balloons which means the full amount of the principal balance is due.
This loan program is good for borrowers who can manage their finances and want to empower themselves to use the free cashflow to invest in other assets or save money.
A Plus Mortgage Rates has a unique 10-year fixed interest only loan program that converts into a principal and interest loan at the end of the term which is nice. We call this a Smart Money loan, there is no need to refinance or come up with balloon payment.
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