Interest Only Payments

Definition

• A payment option where the borrower is only required to pay the interest accruing on a loan. When someone makes interest only payments, the principal remains unchanged, meaning that unless the borrower increases payments, he or she will continue paying interest indefinitely.

Synonyms
interest-only loan, interest-only mortgage

Related Terms and Acronyms

• Amortization — Definition,
  • Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
• End Loan — Definition,
  • The final mortgage on a property, as opposed to a construction or other interim loan.
• Home Equity Line of Credit (HELOC) — Acronym, Very Important,
  • An open-ended loan, paid as revolving debt, that is backed by the equity in the property.
  ➥ Also known as a Home Line of Credit.
• Interest (IN, int) — Acronym & Abbreviation,
  • Money paid for the use of borrowed funds, usually expressed as an annual percentage.
  ➥ Bank account transaction code.
• Interest Rate (IR) — Acronym, Very Important,
  • The rate a lender charges an individual to borrow money.
• Level Payment — Definition,
  • A method of repayment where periodical payments of principal and interest are made in a certain way so the payment amount remains constant.
• Loan — Definition,
  • Letting another party use something of value temporarily.
• Mortgage (mtg) — Abbreviation, Important,
  • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
• Mortgage Payment — Definition, Important,
  • A periodic payment used to pay off a mortgage's principal and interest.
• Principal — Definition,
  • The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
• Principal and Interest (P&I, PI) — Acronym,
  • Acronym for the elements of a mortgage payment: principal and interest.
• Revolver — Definition,
  • A term credit card issuers use for card holders who roll over part of the bill to the next month, instead of paying off the balance in full each month. About seven out of 10 cardholders revolve the debt.
• Revolving Credit — Definition,
  • A line of credit that does not have a specified repayment schedule but may require a minimum payment to cover interest and contribute to paying off principal. Typical of credit card loans, chequing account cash reserve or overdraft accounts that have pre-approved lines of credit.