Typically when a person takes an interest only mortgage, the individual is paying the rent for the house. This is because there is no decrease in the amount of the principal loan. Other countries show that interest only loans are becoming more popular since it’s a great way to buy any asset, whose price is not likely to depreciate much over time. One thing to note – if, at the end of the loan period the person or company is unable to pay the principal amount, the asset can be sold to repay the capital. Some countries allow a person to combine the interest-only loan with a myriad of financial options. Other countries, like Canada, allow a combination of interest-only mortgage with options like corporate bonds and other similar items.
If you decide to go for an interest only loan, you should compare your options carefully. All loans have drawbacks and advantages, so choose wisely. In many cases, you might have to pay property tax. In other cases, you have to buy property insurance that is a mandatory requirement when you take an interest-only loan. At times, a person has to pay a tax on his/her property and purchase the property insurance.