Interest-only payment mortgages aren't a new offering. Rather, like many innovative schemes, they originally grew out of the less-rigid and more inventive jumbo mortgage markets. As such, they were typically aimed at well-heeled, savvy-investor-type clients who preferred to utilize what would have been the principal portion of their payment for other, hopefully more productive investments.
Because they were mostly jumbo loans, obviously the difference in monthly payment grows with the larger loan amount. The $100 per month difference in the $100,000 example above grows to $1,000 per month on a $1,000,000 loan, which is a substantial amount of cash that could be put to better use. For example, while real estate might produce a "return" of the inflation rate plus a couple of percentage points, putting that money to work in the stock market instead could offer much higher returns. A savvy investor might just be able to grow his investment very handsomely in a short period -- leveraging their incomes to build asset strength. This is a viable use of interest-only payments, but naturally there are risks, especially in stocks. However, the type of savvy-investor-type people we're talking about here normally have assets sufficient to help offset any risks of not paying off their homes should they need to sell or refinance.
Most interest-only payment schemes are offered on Adjustable Rate Mortgages (ARMs), but they can be found on fixed-rate mortgages (FRM) as well. They've also entered the mainstream, so that they're available to just about all borrowers.
