In an interest only mortgage, you pay only the interest amount on the mortgage. This form of mortgage is popular with people who are expecting their income to rise over the loan period and thus enabling them to pay back the full loan amount at the end of the loan period.

Interest-only Mortgage
Taking an interest only mortgage gives the advantage of taking a mortgage in which monthly mortgage payments are very less. This means there is lots more money available for savings, which is good, because money can be saved up for later loan repayment when the loan period, which is usually five to ten years, expires. Borrowers can during this time make investment forms which appreciate in value such as stocks, savings, or a small business, which can then be used to later pay off the principle loan due.

In case the borrower is not able to pay the loan amount completely on expiry of the loan period, the entire loan will be converted into an ARM. Many first time home buyers are seen to take up this loan options as are for business owners who expect windfall gains from their business, in a short while.