Amortizing Loans vs Interest-Only Loans: How the loans work and the Benefits & Risk

Are you confused about the difference between amortizing loans and interest-only loans? Wondering which one is better for your real estate investment strategy or personal finance goals? In this video, we break down how amortizing loans work, how interest-only loans are structured, and the pros and cons of each loan type.
👉 Whether you're a first-time homebuyer, a real estate investor, or just looking to understand your mortgage options better, this video is packed with valuable insights.
🔍 What You’ll Learn in This Video:
• What is an amortizing loan?
• How does an interest-only loan work?
• Monthly payment comparison between amortizing and interest-only loans
• When to use each loan type
• Benefits and risks of amortizing loans
• Benefits and risks of interest-only loans
• Which loan is better for real estate investing?
💼 Amortizing Loans include both principal and interest in each monthly payment, gradually reducing the loan balance over time. They are common in traditional home mortgages and are great for building equity and reducing long-term interest costs.
🏛️ Interest-Only Loans, on the other hand, allow you to pay only interest for a set period (usually 5–10 years), keeping your payments lower initially. They are often used by investors looking to maximize cash flow in the short term, but come with risks if property values decline or payments reset.
📉 Key Benefits of Amortizing Loans:
• Builds equity faster
• Predictable monthly payments
• Long-term interest savings
⚠️ Risks of Amortizing Loans:
• Higher monthly payments
• Less cash flow flexibility
💡 Key Benefits of Interest-Only Loans:
• Lower initial payments
• Greater short-term cash flow
• Useful for short-term holds or high-value properties
⚠️ Risks of Interest-Only Loans:
• No equity build-up during interest-only period
• Higher payments after the interest-only period ends
• Potential for negative equity if property value drops
📈 Which loan is better? It depends on your goals, investment timeline, and risk tolerance. Watch the full video to understand when to use each strategy and how to choose the right loan for your situation.
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📢 Comment below — Do you prefer amortizing or interest-only loans for your investment strategy? Let’s talk!

Видео Amortizing Loans vs Interest-Only Loans: How the loans work and the Benefits & Risk канала The Merkerson Method