Interest Only Mortgages

Interest Only Mortgages

Learn more about the pros and cons of interest-only home loans at Blackmon Home Loans in Las Vegas, NV. We know that taking the plunge into homeownership is one of the most important decisions you’ll ever make. But if you’re like most people, you probably have a lot of questions about this type of financial product. We can help you decide if this type of product is right for you.

Interest-Only Loans In A Nutshell

An interest-only mortgage is a type of home loan where you start out by only paying interest for a set term. The initial period can last for anywhere from five to ten years. After that, you’ll have to start paying both interest and principal.

These mortgages appeal to many homeowners because they usually have lower monthly payments than other types of mortgage products. Unless you pay off the loan early or make principal payments, you could end up paying more interest over the life of the loan.

What Are The Pros & Cons Of Interest-Only ARMs?

Sometimes called adjustable-rate mortgages (ARMs for short), interest-only home financing is not right for everyone, so it’s really important to do plenty of research before you decide if this type of loan is right for you. There are both advantages and disadvantages, and the advantages are more geared towards people who have stellar credit, plenty of assets, and may not be looking to hold onto the home for a long period of time.


  • Lower Monthly Payments: As we mentioned, your monthly payments will be lower with an ARM. This can give you some breathing room in your budget and help you qualify for a larger loan.
  • Lower Interest Rates: Interest rates on these mortgages are often lower than rates on traditional loans. This can save you money over the life of the loan.
  • More Flexible Terms: Interest-only mortgages typically have more flexible terms than traditional loans. This means you may be able to choose a shorter or longer payment period, depending on your needs.

Potential Cons

  • Higher Overall Costs: Even though your monthly payments may be lower, you’ll ultimately pay more interest in the long term. This is because you’re not paying down the principal of the loan initially.
  • More Risk: Interest-only mortgages can be riskier than traditional loans because you’re not building equity in your home during the interest-only period. If housing prices go down, you could end up owing more than your home is worth.
  • Higher Payments Later: Once the interest-only period ends, your monthly payments will go up because you’ll have to start paying principal as well. This can be a shock to your budget if you’re not prepared for it.
  • Interest Rates Could Jump: In addition to paying both interest and principal, you run the risk of interest rates jumping during the initial period and locking you into a higher rate during the fixed-rate period. If you can’t afford to pay the higher rate and are unable to refinance, you risk of defaulting on your loan.

When Should I Consider An Interest-Only Mortgage?

Despite the potential risks, there are plenty of borrowers for whom an ARM makes sense. If these factors apply to you, we invite you to contact one of our mortgage lenders to see if you qualify.

  • Investors Hoping To Flip A Property
  • Home Buyers On A Tight Budget
  • Borrowers Who Plan To Relocate Within A Few Years
  • People Who Expect Steady Income Increases
  • First-Time Homebuyers
  • Buyers Who Anticipate Paying Off The Loan Early

Apply For An Interest-Only Loan In Vegas

Now that you know more about interest-only mortgages, you can decide if this type of loan is right for you. If you’re in the market for a home loan in the Las Vegas area, be sure to contact our team at Blackmon Home Loans. We’ll help you find the best financing for your real estate needs and make sure you get the best interest rate possible.

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