Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment increases to cover principal and interest over the remaining loan term. Most borrowers refinance before this happens or have planned for the higher payment.

Question 2

Can I make principal payments during the IO period?

Accepted Answer

Yes, most IO loans allow additional principal payments anytime without penalty. You're only required to pay interest, but you can pay more if you choose.

Question 3

Do interest-only loans work for primary residences in Walnut Creek?

Accepted Answer

Absolutely. Many high-income professionals use them on primary homes to maximize cash flow. Lenders underwrite them the same as investment properties but may offer better terms.

Question 4

How much higher are IO rates compared to conventional loans?

Accepted Answer

Expect 1-2% higher rates since these are non-QM products. Actual rates vary by borrower profile and market conditions, so shopping lenders matters significantly.

Question 5

Can self-employed borrowers qualify for interest-only loans?

Accepted Answer

Yes, many IO lenders accept bank statements or asset depletion for income verification. This makes them popular with business owners who show lower tax returns.

Interest-Only Loans in Walnut Creek — Lower Payments, Strategic Flexibility