German Mortgage Glossary

Interest Only Loan


In an interest only loan, only the interest portion is repaid over a fixed period. So the repayments are quite low at the beginning. But, of course, the full amount of the outstanding amount of the loan is still due for repayment at the end of the term. If you take this type of loan for long term mortgage, then it is highly recommended to make sure that you have other savings, such as life insurance, that can cover the outstanding loan at the end of the term.
 Since the interest payments can be tax deductible for investors, this type of loan is usually of interest to investment buyers.