Finance
What is 'interest-only mortgage' and what are its pros and cons for Hawaii borrowers?
AA. A mortgage requiring only interest payments until paid in full, never reducing principal
BB. A loan where payments cover only interest for a specified initial period (5-10 years), then convert to fully amortizing payments; lower initial payments but higher payments later and no equity buildup during interest-only period✓ Correct
CC. A government-subsidized loan that eliminates interest for low-income borrowers
DD. A reverse mortgage that only charges interest, never principal
Explanation
Interest-only loans provide lower initial payments (no principal reduction) for a specified period. Pros: lower payments allow entry into higher-priced Hawaii properties. Cons: no equity buildup during interest-only period, payment increase when fully amortizing period begins (payment shock), and no protection if values decline. Common in Hawaii's high-cost market but carry risks.
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