11th Dec 2009 by JonB
An interest-only loan is a loan in which, for a fixed number of years, you're payment covers only the interest and no principal. Typically the interest only period lasts 2-5 years and then the loan modifies into a fully amortized loan usually with a variable interest rate that may be high. It's always best to refinance before the interest only loan modifies. Interest only loans have a bad reputation because they have been sold to and used by people who really don't need them. But they do serve a practical purpose as well.
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