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Interest-Only Mortgage
Interest-Only Mortgages
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With reduced monthly payments and interest rates, interest-only loans can be attractive, but risky.

Interest-only means that only the interest part of the loan is repaid until the loan principle becomes due or the loans interest-only period ends. At the end of the interest-only period, adjustable interest rates often kick-in. Originally targeted at the wealthy, the cash flow savings are usually only significant for larger investments, however if you can get a better return on investment than the mortgage rate you can come out ahead. Another benefit is a lower interest rate than standard morgages, but the smaller monthly payment feature is sometimes used by borrowers to to bring on more debt than normally would be allowed. Another downside is that not paying against the principal means that equity gains must come from increases in the market value of the home.

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