Interest Only Loans are making a resurgence in the Home Equity and Home Buyers market.  Some advertisements are touting them as the “new” option, but in reality interest only loans have a very long history.  During the period of the Roaring 20s, interest only loans were the home loan type of choice in the mid-west.  Then, when the Country entered the Great Depression and the bottom fell out of the stock market, lenders found themselves with a lot of foreclosures, most of which had no cash equity value available to them.  At that point, interest only loans were pretty much shelved.

The same things apply to interest only loans today.  Because there is not a way to promote equity in them, and because when the actual mortgage+interest payments begin, they are often way too high to afford; interest only mortgages are not for the average home buyer.  Sure, they serve a purpose in investment situations where a property will not (hopefully) be held for more than 5 years.  But if you are looking for loan options that allow you to gain equity and still have an affordable payment, stay away from the interest only loan product.  It simply is not for you.