Understanding the benefit of non principal repayment loan

I want to understand the benefit of a certain type of loan. Let's say a bank is offering me the possibility to grant me a mortgage loan for 100k for 1.5% interest with a repayment period of 30 years. The difference is that I don't have to repay the principal at all for those 30 years, only the interest. The principal I have to repay as a one-off in 30 years. What I would like to understand is how beneficial is this arrangement.

https://www.calculator.net/loan-calculator.html?cloanamount=100%2C000&cloanterm=30&cloantermmonth=0&cinterestrate=1.5&ccompound=daily&cpayback=month&x=Calculate&type=1#monthlyfixedr

Using this website, I assumed that this arrangement saves me annually the equivalent of the principal repayments, which I could subsequently invest in something else during those 30 years.

My question is, am I understanding this correctly? Are there potential benefits / drawbacks that I am missing?

This was a somewhat popular option in the United Sates back in the 2004-2008 time frame.

Since the amount of the monthly payment was lower with this type of loan, the required monthly income was easier to qualify for.

Another reason it was popular was that the principal portion of the monthly payments isn't tax deductible, but the mortgage interest payments, along with their state income tax, and property tax are deductible. This type of loan didn't have principal portion, this meant they weren't spending money on a non-deductible expense. This time period was before the SALT limits from the 2017 tax changes.

This worked perfectly if the value of the house increased while the mortgage was interest only. But if that didn't happen, or even worse if the value of the home crashed then it was more likely that the seller had to bring a check to closing when they sold the house.

The problem is that if the only way you can even reasonably afford the house is through a gimmick mortgage, then the whole purchase is on thin ice. Other tricks were payments that were smaller than required and the mortgage balance increased each month.

When prices dropped in the 2006-2010 period many loans were underwater, or people couldn't afford to sell.

The benefit to you is that you can get a slightly bigger loan because you don't have to make the principal part of the payment. I say slightly bigger because with a traditional 30-year mortgage the principal portion is initially only about 10%-15% of your monthly payment depending on the interest rate. So you could borrow about 10% more, all else being equal.

The benefit to the bank is that they get the same interest amount over 30 years instead of the interest dwindling over time.

The drawback to you is that in 30 years you'll have a massive balloon payment due that you'll either have to refinance or risk losing the house in foreclosure.

Another drawback is that interest-only loans tend to have higher interest rates because they are used for higher-risk borrowers. Lenders can charge a higher interest rate for the same monthly payment because there is no principal portion.

With an interest-only loan you are essentially "renting" the house - you are not building any equity other then the increase in market value when you go to sell it.

Roughly speaking you are borrowing the amount you would have paid in principal at the note rate, tax deductible to the extent the interest is. If the interest rate is low enough you want that loan, take it. In your example the payment would be 125/mo instead of 345/mo. If you can invest the 220/mo at better than 1.5% you will have more than 100k at the end of 30 years, can make the balloon payment, and be cash ahead. Bonds are paying more than that now and look to do so for the foreseeable future. Liquidity can also be valuable. If you take the amortized loan and wind up borrowing money for any reason, taking it out of these savings may be less expensive than other options. On the other hand I would be amazed if you can get an interest only mortgage (or any other kind) at 1.5%.