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Interest Only Loans

Interest only loans have become very popular as a method to keep more of your money in your pocket for other uses. Interest only loans come with the same variety of features as fixed and variable interest rate loan programs but with the benefit of a lower payment because you are only paying on the interest and not the principle loan amount.

According to industry analysts, interest only loans offer the following advantages: 

  • Funds can be allocated to uses that deliver the greatest rate of return. For example, a mortgage rate might be 5-7% after tax but an employer maintains a 100% 401(k) match—the 401(k) match is the wisest investment and the savings provided by the interest only loan allows you to make that investment.
  • High interest credit card debt can be targeted for payment before the lower interest associated with the home mortgage.
  • Opting for an interest only loan allows a borrower to qualify for a larger, more expensive home—that means you can get the home you want.
  • Interest only mortgage products allow you to pay on principle at any time.

Interest only loans and interest only home mortgage rates can be more costly than a traditional fixed rate or adjustable rate mortgage but the benefits usually offset the costs. The following table compares these benefits versus costs:

Loan Program Advantages Disadvantages
Interest Only Programs
  • Several payment options
  • Lower monthly payments
  • Qualify for a higher loan amount
  • Qualify at the interest only payment
  • Option to pay the full principal and interest payment
  • Interest only payments for up to ten years
  • Higher rates
  • Principal loan balance will not decrease during the interest only payment period
  • Payment will be higher for the remaining term

Interest only loans provide the borrower with greater buying power, lower monthly payments, and greater financial flexibility. One of the primary considerations for borrowers interested in an interest only loan is that the payment is based on the principal balance and the principal balance does not decrease which results in the payment of more interest compared to traditional mortgage products.

PRODUCT UPDATE: Alpine Mortgage has suspended our interest only loan program. We will update this page when we are accepting new applications for this program.

Interest Only Tools & Advice

  • Benefits of Interest Only Loans
    This link provides you with a full review of all the benefits of interest only loans and interest only home mortgage loan rates.