In practice, it happens because people die. So they mostly can't get interest-only loans, as passing that loan down to another generation is way too risky.

Also, that kind of loan is usually seen as predatory by finance regulators (for good reason). So people are usually required to jump through some hoops to get one.

That said, as a sibling already pointed, some times it happens. And companies have a much easier time getting them.

You can actually get an interest-only mortgage, it's not super uncommon, and you could refinance every 7-10 years to keep it interest-only in perpetuity, if you wanted to.

I guess a good measure of tipping point is when the interest payment begins to approach GDP. As things stand today the interest payments is ~$900B[1] and the GDP is ~$25T[2]. Assuming the US govt collects ~10% of GDP as taxes it's making $2.5T. I'd say we are still quite a while away before the aforementioned tipping point.

Disclaimer: I'm not an economist and just made up this measure, happy to stand corrected by experts.

[1] https://fred.stlouisfed.org/series/A091RC1Q027SBEA

[2] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...

That's the difference between a mortgage and a bond. A bond only requires interest payments until the term is up and then it is repaid in full all in one payment.

It does get paid in full at the maturity. It's just that the governments rollover the debt by selling new debt.

Interest only mortgages are very common in the commercial real estate space.