Which of the following is a characteristic of an interest-only mortgage?

An interest-only mortgage is specifically designed to allow the borrower to pay only the interest for a set period, typically ranging from 5 to 10 years. During this initial phase, the principal balance remains unchanged, meaning that the borrower is not reducing the amount owed on the loan. After the interest-only period ends, the borrower must begin paying both principal and interest, which can lead to significantly higher monthly payments if the principal is due at that time.

This type of mortgage can be attractive for borrowers who want lower initial payments and may be expecting an increase in income or a higher cash flow in the future, making it easier to handle larger payments later on. It also suits those who might plan to sell the property or refinance before the interest-only period concludes.

The other choices detail different types of mortgages and payment structures, but they do not represent the unique feature of an interest-only mortgage.