Question:

Is it possible that with interest only mortgage amortization is much faster compared to FRMs and ARMs?

Answer:

Interest only mortgage amortization is made to appear more desirable by experienced brokers by making it seem something different than a payment option of an ARM which in fact it is.

Amortization can indeed be more rapid with an interest-only mortgage if the borrower is concerned with the level of amortization achieved with the same amount of payment made towards an FRM and an Interest-Only loan.

Consider the following example: if your monthly payment for a fixed-rate mortgage is $500, of which only $100 is used against the principal, and the payment for the interest only mortgage is $250 then you still can pay $500 monthly but $250 of it will be used for the principal, which seems to lead to faster amortization.

However, since the interest only loan is a masked ARM, you may benefit more if you simply make use of an ARM's lower fixed rates and make larger payments than required in order to settle more of your principal and when the fixed period expires, interest rates will be recalculated over a smaller principal.

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