Liquidating loan

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Self-liquidating mortgages work by parceling, or amortizing, your money out.

Every month, you pay the interest due on the loan and a piece of the principal.

With an interest-only mortgage, your monthly payment doesn't have any principal.

If you borrow $250,000 on a fixed-rate 5 percent interest-only loan, your payments will be $1,041.67 per month until the loan period ends.

In view of high exposure to risk for a comparatively low return, commercial banks have understandably tried to find ways to protect themselves.