What distinguishes a principal and interest loan from an interest-only mortgage?

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1 Answer 3
Mark Robert

Answered 19 hours ago

A principal and interest loan involves regular repayments that cover both the original loan amount (principal) and the interest charged. Over time, this reduces the loan balance until it is fully repaid. In contrast, an interest-only mortgage requires payments that cover only the interest for a set period, with no reduction in the loan principal during that time. After the interest-only term ends, repayments typically increase as both principal and interest become payable. The key difference lies in how each structure affects repayment amounts and loan balance over time.

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