An interest only mortgage is a type of mortgage that a person pays the interest only for a set period of time, say 3 or 5 years. After that, the person starts paying on the principal plus interest for the rest of the term of the mortgage (ex. 25 years). During those 25 years, the interest rate can be adjusted once each year.

The problem people will face is that after the initial five years of paying the interest only, they will end up with a larger mortgage payment for the next 25 years. If you're not certain that your income and property value will continue to rise, you might find yourself in a lot of financial trouble when you can't afford your mortgage payment any longer. It takes financial discipline to make sure you can afford the mortgage payment after the first five years.

There was a young married couple featured on a television show who bought a $995,000 home with an interest-only mortgage. Their combined annual income was a little less than $100,000. They couldn