Types of Mortgage Loans with a New Orleans Area Associate Broker, Part 3 (Interest Only Mortgages)

What is an interest-only mortgage? Interest-only mortgages are a less common but notable type of mortgage loan but carry some inherent risks! During the initial phase of an interest-only mortgage, your payments exclusively cover the interest costs, with none of the funds going toward reducing the principal balance you own. Even though initial rates are often lower than fixed-rate mortgages, they will eventually increase significantly to include both interest and principal payments. Some may even require a balloon payment to settle the entire balance. Be aware, these loans can be misused to help qualify homebuyers who may not otherwise be able to qualify.