Like any type of mortgage, interest only mortgages have some benefits and some disadvantages. They allow for lower monthly mortgage payments than other kinds of mortgages, but the amount of money owed does not reduce during the interest only mortgage period. Here are some things you should be sure to consider before taking out an interest only mortgage.

1. The amount of debt will not reduce unless extra payments are made, in addition to the regular monthly payment. You may be able to make such payments during times of the year when expenses are lower, or if your income eventually increases. For example, it might be more convenient to make larger payments during the Spring and Autumn when heating and cooling expenses are lower. Not making any extra payments will cause it to be more difficult to eventually pay off the loan.

2. Although the monthly payments are lower with interest only mortgages, they are not necessarily a fixed amount. Many interest only mortgages have an adjustable rate; be sure to determine how often the rate can change and what the maximum rate is, so as to be prepared for the possibility that it will increase.

3. Does it compare favorably with renting a house or apartment for the same period of time? When renting, the tenant can easily re-locate and usually doesn’t have to pay for maintenance, property taxes, and various other services; interest only mortgages without extra payments can be like renting without these benefits. However, like any mortgage, it allows the owner to make changes and improvements to the home.

4. What will you do when the term of the interest only mortgage has ended? Wikipedia.org indicates that home owners are expected to refinance, switch to a typical mortgage (with payments including principal and interest), or pay all of the principal owed, when this happens. This can be problematic if a large amount of money has been mortgaged and/or your monthly income remains relatively low.

Basically, mortgages of this type can be financially convenient in some situations, but are not the best choice for everyone, and should not be used to purchase a home you cannot realistically afford. Making sure you consider such things before taking out an interest only mortgage will help prevent you from failing to properly plan your financial future, and ensure that a mortgage of this type is right for you.