An interest-only mortgage requires the borrower to make monthly payments solely on the interest due on their loan excluding principal, at least in the beginning.  This arrangement lasts for a specific amount of time, for example 5 years.  Afterwards principal will be included in the monthly payments.  Essentially, you’re delaying repayment on the principal and reducing your monthly mortgage payments in the short term.  With this type of mortgage, you will end up spending more on housing costs once the interest-only period comes to an close.  Because you are delaying the principal repayment on an interest-only loan for several years, your mortgage payments will be lower at the onset.  However, that also means your monthly payments will increase later on once you start repaying the principal.  Therefore, when analyzing this option there is a significant trade-off to consider.