An interest-only mortgage means you pay only the interest during the term and not the actual loan amount. This option is often available when taking out linear mortgages. To repay earlier than planned, a specific clause is required in the mortgage agreement.
Advantages of an interest-only mortgage include lower monthly costs as only interest is paid, usually no need for additional insurance, and you may be eligible for a tax deduction.
A disadvantage is that you do not build up any equity as no repayment is made. Upon sale of the property, the outstanding amount will be offset against the proceeds.
Banks typically lend up to 60% - 70% interest-only to companies, requiring an own investment.
