Quick answer
An interest-only loan is a mortgage whose scheduled payments cover only the interest for a set period, so the amount you owe doesn’t go down. When that period ends, you must start repaying principal — usually through higher monthly payments — pay off the balance, or refinance.
Key facts
7.24%
30-year fixed average (used in the example)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
The payment jump
Take a $300,000 30-year loan at 7.24% with a 10-year interest-only period. For ten years the payment is $1,810, and the balance is still $300,000 at the end. The full balance must then be repaid over the remaining 20 years, so the payment rises to $2,369 — $559 more, a 31% increase. An ordinary fully amortizing 30-year loan at the same rate costs $2,044 from the start and has been paying down principal all along.
Don’t count on selling or refinancing before the jump: home values can fall and your finances can change.
Who offers them
Interest-only features aren’t allowed in a Qualified Mortgage, so these loans are usually non-QM or jumbo products with stricter requirements. The same pattern shows up in a HELOC’s draw period, and some loans end in a balloon payment instead of a higher monthly one. The interest-only mortgages guide covers who they suit and the risks.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- CFPB: What is an interest-only loan?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.