What is interest-only mortgage?

An interest-only mortgage is a type of mortgage agreement in which the borrower pays only the interest on their loan each month, instead of paying both the principal and interest. This type of mortgage agreement was much more common prior to the housing crisis of 2008 and is still used today in some parts of the United States. In Washington, interest-only mortgage agreements are regulated by the state’s Department of Financial Institutions. These agreements generally have adjustable interest rates, meaning that the interest rate on the loan is subject to change from year to year. This has led to concerns about affordability for borrowers and the overall stability of the state’s housing market. When considering an interest-only mortgage agreement, it is important for borrowers to understand their rights and responsibilities under the contract, as well as any potential risks involved. For example, with an interest-only mortgage, borrowers may build up significant equity in the home, but if the loan is not paid off the borrower may end up owing more than the home is worth. Additionally, when the adjustable interest rate is reset, the monthly payments can become unaffordable for some borrowers. It’s important to understand the pros and cons of an interest-only mortgage before committing to this type of loan. Borrowers should also make sure they understand the terms of the agreement and any risks involved. In general, borrowers in Washington are encouraged to seek out advice from a financial advisor or other knowledgeable professional before entering into an interest-only mortgage agreement.

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What is interest-only mortgage?

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