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 You cannot build equity in your home with an interest only loan. The biggest investment
in your entire lifetime will probably be your home. When a homeowner pays the
monthly mortgage payment, much of that payment is interest on the principal amount
that was borrowed. Home equity is nice to have in case of an emergency. If you lose your job, suffer from an accident or an injury, or are struck by sudden illness, you may experience a reduction in income or a loss of income. A home equity loan may help you pay the monthly bills, until you get on your feet again. When you have an interest only loan, you may not have this hidden cash to fall back on, unless you are several years into your mortgage, have been paying on the principal for some time, and have enough equity build up. If you are expecting a promotion or a raise in the future, an interest only loan may be right for you. Often, you can borrow more than you would normally be able to, as your payments are lowers when you are in the interest only payback phase of the loan. Then, the payment increases when you begin to pay on the principal as well. . Interest
Only Loan:
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However,
the rest of the payment is applied to the principal. Each month, the principal
balance is reduced. Thus, the equity in the home builds each month. You cannot
build equity in your home with an 
