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When it comes to monthly housing expenses, most people are trying to keep costs minimized. The reduction of the monthly mortgage payment will typically have the greatest impact on cost reduction. Seeking out low mortgage rates on bank loans is the most common way to reduce monthly mortgage payments. One option for lower rates available for would-be borrowers is interest-only mortgage loans. With a standard mortgage loan, part of the monthly loan payment goes toward repaying the outstanding loan balance. This is not the case with interest-only mortgages, where monthly payments are only used to cover interest costs. With no loan amortization and a lower interest rate, a borrower can have a lower monthly payment in comparison to traditional mortgages. To run some payment scenarios, you can find tools on the Internet (search ‘mortgage payment calculator’). So how does one pay off an interest-only mortgage, if the loan balance is never reduced? After a specified number of years, the borrower will have to make a balloon payment to pay off the entire loan. However, what if prevailing mortgage loan rates make refinancing unfeasible when the loan comes due? An unfortunate scenario such as this could require a mortgage modification discussion with the lender. Consult with a mortgage professional to determine if an interest-only loan is right for you.