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Pros and Cons of Interest Only Loans
Given the current low interest rates - let's assume 4% - this might be a viable option for a lot of people.  Let's also assume that your actual interest rate after figuring in tax considerations ends up at around 3%.  I think I am being pretty fair with the numbers. Now every dollar that you save each month based on the savings and invest with a higher net return of greater than 3% will in fact be "free money".  You are basically betting on your ability to invest over the 3%.  Even if using a conservative historical rate of return on the market you should net far better than 3%.  This money would be significant after 10 years.   Let's say you earn an average of 8% on your money over the 10 years.  Well you would have an extra $77K by doing interest only if you were paying on average of $500 a month towards interest on a conventional loan.  That is a pretty average house in the US.  Who doesn't want $77K (more than you would have compared to just principal).  So after 10 years you have the same amount in principal plus $77k given that you take all of the saved money and invest it at the constraints above. I would suggest that people take interest only if they are willing to diligently put away the money as they had a conventional loan.  Another scenario would be a wealthier home owner (that may be able to pay off house at any time) to reap the tax breaks and cheap money to invest. Pros: Cons: Sidenote:  If people ask how viable is this.  Well I have done this for 8 years.  I have earned an extra 110K.  I have smaller than $500 I put away each month since my house is about 30% owned but have earned almost 14% on average over the last 8 years.  My money gets put into an e-trade account automatically each month from there I funnel it into different funds (diversified by sector and region).  I literally spend a few minutes a month on this and I truly act like the money isn't there.  What is also nice is that the bank will account for about half of this as being a liquid asset when I have to renegotiate another loan.