What type of mortgage allows the borrower to make interest-only payments temporarily?

The type of mortgage that specifically allows the borrower to make interest-only payments temporarily is an interest-only mortgage. With this type of mortgage, the borrower pays only the interest on the loan for a specified period, typically ranging from 5 to 10 years, after which they begin to pay both principal and interest. This option can make initial monthly payments lower, which may be attractive for borrowers seeking to manage their cash flow during the early years of the loan.

Interest-only mortgages can be beneficial in scenarios where a borrower expects to increase their income or sell the property before the principal payments kick in. During the interest-only period, the borrower can invest any savings or additional funds elsewhere, potentially leading to greater financial flexibility.

The other types of mortgages mentioned don’t have the same structure for payment. A fixed-rate mortgage involves consistent monthly payments of both principal and interest throughout the life of the loan, providing stability in payment amounts but not allowing for interest-only periods. An adjustable-rate mortgage also requires payments of both principal and interest but does involve fluctuating interest rates after an initial period, which does not equate to temporary interest-only payments. Lastly, a balloon mortgage involves lower payments for a certain term, but then requires a large final payment of the principal due at