What is a 40 year interest only mortgage?

A 40 year interest only mortgage is a home loan with a repayment term of 40 years and monthly payments that go towards paying on the interest. The borrower makes payments for the interest accumulating on the loan for a time frame of usually 5 or 10 years. This makes monthly payments lower since the principal amount on the loan is deferred until the 5 or 10 years have expired. After the initial interest only term limit, the interest and principal will be amortized, or spread over the remaining life of the loan. Interest only loans make it easier for a borrower to afford monthly payments in the present. There is the expectation that the borrower's income will increase within 5 to 10 years, making the principal payments more affordable in the future.

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