Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment jumps to cover principal plus interest over the remaining loan term. Most borrowers refinance before this happens to avoid payment shock and reset terms.

Question 2

Can I make principal payments during the IO period?

Accepted Answer

Yes, most interest-only loans allow voluntary principal payments without penalty. You control when and how much you pay down the balance beyond required interest.

Question 3

Do interest-only loans cost more than regular mortgages?

Accepted Answer

Rates run 0.5-1.5% higher than conforming loans because they're non-QM products. You pay for flexibility and reduced monthly obligation during the IO term.

Question 4

What credit score do I need for interest-only in Orinda?

Accepted Answer

Most lenders require 680 minimum, but 720+ gets better pricing. Scores below 700 may need larger down payments or face stricter income documentation.

Question 5

Are interest-only loans good for investment properties?

Accepted Answer

They work if you need cash flow for other investments. DSCR loans often fit better since they ignore your W-2 income and only check rental income coverage.

Interest-Only Loans in Orinda: Strategic Financing for High-Income Professionals