What Is an Interest-Only Loan?

Interest-only products are non-traditional amortization methods implemented in the home mortgage market. In a pre-agreed period called the lock-up period, the borrower only needs to pay interest and recalculate the monthly principal and interest payments after the lock-up period in order to pay off the entire principal loan in the remaining loan period. Interest-only products can be fixed-rate mortgages, variable-rate mortgages, or hybrid variable-rate mortgages. ^[1]