An interest-only mortgage is a mortgage where the borrower only pays the interests carrying costs of the mortgage. This means that there is no portion of the payment being directed to the pay down the loan.

This can be a useful option for borrowers who expect their income to increase in the future, or who need to conserve cash in the short-term. It is important though to note that an interest-only mortgage, will need to be paid off in full at the end of the term.