An interest-only mortgage lets you make only interest payments on your mortgage for the first years, often five or ten. After that, you pay both principal and interest. In this video, you'll learn a simple way to understand this concept through an easy and brief explanation. If the monthly payments on a fixed-rate loan are too high, you may be tempted by an interest-only mortgage for better monthly cash flow. You’ll typically find interest-only loans structured as 3/1, 5/1, 7/1, or 10/1 adjustable-rate mortgages, or ARMs. After the introductory period, the interest rate will change once a year.