How they work.
They are usually fully amortizing fixed rate loans that may have a term of 10, 15, 20 or 30 years.
An Interest Only Fixed-rate Mortgage that is amortized over 30 years permits the borrower to pay interest only for the initial interest-only period of 10 or 15 years.
Following the initial interest-only period, the outstanding principal balance will be re-amortized over the remaining term of the loan. This will most likely cause the borrower's monthly payment to increase, since it will now include a payment of principal and interest. Interest Only Fixed-rate Mortgages will fully amortize by the end of a 30-year term.
Lenders offer the following two Interest Only Fixed-rate Mortgage options:
|Conforming Loan Limits|
|Number of Units||Contiguous States, District of Columbia, and Puerto Rico||Alaska, Guam, Hawaii, and the U.S. Virgin Islands|