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An interest-only mortgage typically has a fixed rate and fixed monthly payments for an initial period — say, the first 10 years. These initial payments pay down only the interest on the loan, not the principal. At the end of the initial period, the rate changes from fixed to adjustable, and the monthly payments increase, becoming payments toward principal and interest for the remaining loan term.
This calculator helps you compare the payments during the interest-only period to the payments on a fully amortizing mortgage.