Many mortgages are interest-only loans -- this allows the lender to make a quicker profit on the loan, and keep the interest rate low. As James Kitchen notes in ArticleInsider, during the first years of an interest-only mortgage, the entire monthly payment goes toward interest.
Wikipedia also mentions that many interest-only loans are structured so the initial interest-only payments are lower than the principal payments. This allows the borrower, who expects to earn more over time, to obtain a larger loan. For more on the ins and outs of loans, we suggest visiting Yahoo! Finance's Loan Basics.
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