Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment increases to include principal, typically jumping 25-40%. Most borrowers refinance or sell before this happens rather than absorbing the higher payment.

Question 2

Can I make principal payments during the I-O period?

Accepted Answer

Yes, most loans allow extra principal payments without penalty. You're just not required to pay principal during the initial period.

Question 3

Do interest-only loans have higher rates?

Accepted Answer

Usually yes, rates run 0.5-1.5% higher than conventional mortgages. You're paying for payment flexibility and non-QM underwriting.

Question 4

Who uses interest-only loans in San Pablo?

Accepted Answer

Investors flipping properties, self-employed borrowers with irregular income, and high earners who want to invest cash elsewhere instead of building home equity.

Question 5

How long does the interest-only period last?

Accepted Answer

Typically 5-10 years depending on the lender and loan structure. After that, the loan fully amortizes over the remaining term.

Interest-Only Loans in San Pablo — Lower Payments Upfront, Higher Flexibility