Interest-Only Loan
A mortgage where your payments only cover interest for a set period, without reducing principal.
In plain English
For an initial period (commonly 5–10 years), interest-only loan payments cover just the interest owed, keeping your loan balance unchanged. Once that period ends, payments rise to cover principal too, over a shorter remaining term.
Because you're not building equity during the interest-only period, this structure carries more long-term risk and is uncommon for primary-residence first-time buyers.
Where you'll run into it
Guides and tools on TheBuyingPath that cover interest-only loan in context.
Related terms
Not sure where this fits in your process?
Answer a few questions and get a personalized homebuying roadmap — where you are now, what comes next, and which terms like this one matter at each step.
Start your roadmap