Interest-Only Loan

Interest-only mortgages are non-conforming loans, making them difficult to discover and (typically) considerably more difficult to obtain. Interest-only choices are limited because only conforming mortgages may be insured, guaranteed, and backed by Fannie Mae and Freddie Mac. An interest-only mortgage is pretty easy during the first 5 or 10 years of the loan: the borrower pays just the interest payable on the loan. Things get more expensive when the interest-only period passes. The principle begins to amortize in year 6. The overall monthly mortgage payment on the loan significantly increases since you are now paying both interest and principal over a shorter period.