I know deferred interest is often used with adjustable rate mortgages, but the whole thing would make me a little nervous.
I would rather know up front how much I am going to be paying for the life of a loan. In some situations it can work out to be advantageous though.
I have some friends who had an ARM and because of the low interest rates, their payments actually went down. In another 5 years it will be adjusted again, and it could be much higher.
There are many income situations where a deferred interest loan works for people. I just know I am the type of person who would rather have exact amounts from the beginning to the end.