*Loan,banking and credit>>>bank loan

How the heck does a bank make money on an interest-only loan? Or is that a misnomer?

Or am I just an idiot? Doesn't make any sense to me.....

Ok you're an idiot. But we all are at times. I think you will be saying duh to yourself on this. Interest only means all you pay is the interest with nothing going to the principle. However long that goes on for you still owe the entire principle amount of the loan. Now when I got a 0% cash advance on my credit card that was a bargain!

For all the people that borrow it adds up quite a bit
Interest is all you are obligated to pay and they are the ones it is paid to. They are giving you a loan for the value of the house. They are delighted if you take a loan in which they always collect the maximum possible interest and never make payments that reduce the interest amount.

Don't forget that if you can't pay them their interest they keep your house.

In the meantime they have your interest money that they can invest elsewhere so it is a bank's favorite deal!
don't call yourself an idiot...

the interest that you pay a bank is based on the principal balance. if the loan is an interest-only loan, the principal never gets paid down so the monthly interest payments are the highest.

the interest paid to the bank will be less and less as the principal is paid down.
they make money because all you're paying them is interest...you have not reduce your principle a bit. And when you refinance, you're forced to pay the same amount that you owe since the beginning despite all the "interest only" payment you've been making. Most loans are interest only for only a certain amount of years because they start making you pay interest and principle + interest for remaining of the loan. Banks always make money, lots of money, can never outsmart and outlast them there.
what do you thing this interest go? not paying mortgage only interest for them.
In simple terms:
The interest you pay is the money the bank is making off of you. When you pay more then just the interest, you are paying off your debt in addition to paying the bank money for making you the loan.