Question 1

How long is the interest-only period on these loans?

Accepted Answer

Typically 5 to 10 years, depending on the lender and program. After that, payments reset to include principal — and they go up significantly.

Question 2

Can I use an interest-only loan on rural land in El Dorado County?

Accepted Answer

Yes, but lender appetite varies by property type. Acreage and mixed-use parcels narrow your options — working with a broker helps.

Question 3

Do I build equity during the interest-only period?

Accepted Answer

Only if the property appreciates. You're not paying down principal, so your loan balance stays flat during the IO period.

Question 4

What credit score do I need for an interest-only loan?

Accepted Answer

Most lenders want 700 or above. Lower scores are possible but come with higher rates and tighter reserve requirements.

Question 5

Is an interest-only loan risky in a slower market?

Accepted Answer

It can be. If values drop and you owe what you paid, selling or refinancing gets harder. Know your market before committing.

Question 6

How is this different from an ARM in Placerville?

Accepted Answer

An ARM adjusts your rate but still requires principal payments. Interest-only skips principal entirely during the IO period — lower payments, more risk.

Interest-Only Loans in Placerville, CA