What does I/O mean in MORTGAGE

An I/O mortgage is a type of home loan where borrowers only make payments that cover the interest on the loan. This type of mortgage does not require any repayment of principal.

The length of an I/O mortgage term differs depending on the borrower's circumstances. Generally speaking, these types of mortgages have a fixed-rate and a set amortization schedule that lasts between 5 and 30 years.

Some advantages include potentially lower monthly payments since you are only paying for the interest portion of your loan, as well as higher flexibility with your cash flow since you don't need to worry about repaying principal at this time.

While there may be benefits associated with I/O loans, there are also potential risks involved. These include increased risk for default if borrowers fail to repay principal when it comes due, or if they don't refinance their loans when necessary. Additionally, since borrowers aren't building equity in their homes during the term, they could be more vulnerable to market fluctuations once their mortgages reset and higher monthly payments become due.

Interest only mortgages may be suitable for people who expect their income or other financial resources to increase over time in such away that would allow them to start repaying principal when it becomes due at the end of their loan's term period. It could also be appropriate for short-term investments such as flipping houses or renovations that will eventually result in increased value associated with the property being mortgaged after completion.