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Interest-Only
(redirected from Interest Only)

   Also found in: Acronyms 0.01 sec.
Interest-Only
1. Describing a derivative in which the underlying asset is future interest payments on a pool of mortgages or other debt obligations. Interest-only derivatives are highly exposed to prepayment risk as homeowners who pay off their mortgages or loans early do not generate any more interest payments.

2. Describing a non-amortized loan. During the payment period of interest-only loans, one only pays on the interest that accumulates but not on the principal. At the end of the loan's term, the entire principal is due. An example is an interest-only mortgage, in which one makes interest payments for the term of the mortgage and then refinances in order to pay the principal at maturity.

interest-only (IO)
Of or relating to a derivative mortgage security scheduled to receive interest only from a pool of mortgages. An IO derivative security has no par value, and the owner of the security can lose money because of mortgage prepayments that reduce or eliminate interest payments. Compare principal-only.


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Have you been looking into the prospect of buying a home If you have, you may have heard about interest only mortgage loans and may be wondering if getting an interest only loan is the right option for you Have you been looking into the prospect of buying a home?
As you might have guessed already, signing up for an interest-only mortgage means that during the interest only period of the loan, monthly payments are very affordable -- much less than they would be if you were making standard amortized payments to cover both the principal and the interest.
You may have heard of an interest only mortgage as an option for lower monthly payments on your mortgage payments.
 
 
 
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