Interest Only Mortgages

Eligibility:

Generally available to borrowers with good credit, these mortgages can suit those with irregular income or expecting significant future earnings.

Benefits:

1. Lower Initial Payments: Monthly payments during the interest-only period are lower than traditional mortgages, providing short-term financial relief.

2. Flexibility: Suited for those anticipating increased income in the future or planning to sell the property before the principal repayment begins.

Pros:

1. Initial Affordability: Ideal for individuals looking for lower initial monthly payments, freeing up funds for other financial priorities.

2. Investment Opportunities: Borrowers may redirect funds saved during the interest-only period toward investments or home improvements.

Cons:

1. Higher Future Payments: Once the interest-only period ends, monthly payments increase significantly as borrowers start repaying both principal and interest.

2. Potential for Negative Amortization: If home values decline, borrowers may owe more than the property is worth when principal repayment begins.

3. Limited Equity Buildup: During the interest-only period, borrowers aren't building equity in their homes, potentially affecting future financial flexibility.