Interest-Only Mortgage
An interest-only mortgage requires payments covering only interest charges for an initial period, typically 1-5 years, with no principal reduction until the interest-only period ends.
| Structure | Terms |
| Interest-only period | 1-5 years |
| Payment composition | 100% interest |
| Principal balance | Unchanged during period |
| Subsequent period | Full principal plus interest payments |
| Payment Comparison | AED 2M at 5%, 25 Years |
| Interest-only payment | AED 8,333 monthly |
| Standard payment | AED 11,684 monthly |
| Monthly savings | AED 3,351 |
| After 5 years balance | AED 2,000,000 (no reduction) |
| After 5 years new payment | AED 12,996 (20 years remaining) |
| Strategic Applications | Rationale |
| Short-term ownership | Exit before interest-only ends |
| Cash flow management | Minimize initial payments |
| Investment properties | Match rental income |
| Income growth expectation | Anticipate higher future earnings |
Related Terms
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