Dry Mortgage Loan Definition & Meaning | Financial Term | CSIMarket
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Glossary

Dry Mortgage Loan

Financial Term

A dry mortgage loan, also known as a straight mortgage loan or interest-only mortgage loan, is a type of mortgage loan in which the borrower only pays the interest on the loan amount for a set period of time. During this time, the borrower does not pay off any principal on the loan, resulting in a higher monthly payment but a lower overall cost for the loan.

Dry mortgage loans are often used by individuals or businesses who are looking to purchase a property but do not have the funds to pay off the entire loan in one go. They may also be used by those who want to free up cash flow for other investments.

In the financial industry, dry mortgage loans can provide lenders with a steady and reliable stream of interest payments over the life of the loan. They may also be used as a way to manage risk, as the lender is expected to receive ongoing payments rather than a lump sum payment at the end of the loan term.

However, dry mortgage loans do come with some risks for lenders and borrowers. If property values decrease or interest rates rise, the borrower may have trouble refinancing or repaying the loan. Additionally, if the borrower defaults on the loan, the lender may not be able to recoup the full value of the loan due to the lack of principal payments.


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