Interest Only Mortgage

Interest only is a Mortgage Plan in which the borrower repays only the interest initially and defers payment of principal for later in future. This is done basically to minimize the equated monthly installments. Interest only Mortgage Plan is beneficial for all those who think their income in future is going to swell considerably. Students and fresher who have just started their career normally opt for this plan as initially they may not be in a position to pay large Monthly Installments.
The system works in a simple manner. Let's analyze the difference between other plans and Interest only Mortgage. In other plans your EMI includes both Payment of Interest and the Principal Amount. Say you pay EMI of $ 1000. Out of this maximum amount goes towards Interest Payment and a small portion goes towards the Payment of Principal. While in interest only system all amount goes only towards the payment of interest, i.e. you need to pay much lower amount as EMI.
The Interest-Only Mortgage Plan continues for 5-10 years depending on the agreement between lender and you and later converted to normal plans. It can be integrated with both adjustable rate mortgage and fixed rate mortgage. The plan holds some of the extremely beneficial features that include:

1. Potential tax deductions (may not be applicable to all, consult your tax advisor)
2. Manage unforeseen expenses
3. Repay higher cost, non-deductible consumer debt.
4. Reduce future monthly payments when principal pre-payments are made during the interest-only period. (The reduced payment would be based on the new lower principal balance.)
5. No Pre-Payment Penalty.
6. Large loan amounts available.

Some other Benefits of Interest only Mortgage:

1. 30-year Adjustable-Rate Mortgage with an initial fixed-rate period
2. Select your initial fixed-rate period of 2-, 3-, 5-, 7-, or 10- years.
3. Interest-only Payments available for the first 10- years of the loan. For the remainder of the term, Interest Rates adjust based LIBOR plus a margin.