What is the primary benefit of an interest-only mortgage?

The primary benefit of an interest-only mortgage is that it offers lower initial monthly payments. This structure allows borrowers to pay only the interest on the loan for a specified period, which typically ranges from 5 to 10 years. During this interest-only phase, the principal amount does not decrease, and the monthly payments are significantly lower compared to a traditional mortgage where both principal and interest are paid.

This lower payment can be particularly advantageous for borrowers who anticipate that their income will increase in the future or for those who prefer to allocate their funds toward other investments or expenses. It can also provide some financial flexibility in the short term, allowing homeowners to afford a larger property than they might otherwise be able to.

In contrast, the other options do not represent a key benefit of an interest-only mortgage. Higher initial monthly payments typically characterize traditional amortizing loans, fixed rates throughout the term might be seen in both interest-only and standard mortgages, and a longer payoff period may result from extending the interest-only phase but doesn't reflect the primary advantage offered. Thus, the appeal lies mainly in the lower initial monthly payment that facilitates affordability and cash flow management for homebuyers or investors.