Question 1

What happens after the interest-only period ends?

Accepted Answer

Payments recalculate to cover principal and interest over the remaining term. That spike can be significant — budget for it or plan to refinance.

Question 2

Can I use an interest-only loan for a Clearlake rental?

Accepted Answer

Yes, and it can make sense for cash flow management. A DSCR loan may be easier to qualify for on a rental property.

Question 3

Do interest-only loans require higher credit scores?

Accepted Answer

Yes. Most non-QM lenders require 700 or above. Some go lower with a larger down payment.

Question 4

Are interest-only loans adjustable or fixed?

Accepted Answer

Both structures exist. Fixed-rate IO loans cost more. Adjustable IO loans add rate risk on top of payment-reset risk.

Question 5

Will I build equity with an interest-only loan?

Accepted Answer

Not during the IO period — you're paying zero principal. Equity only grows if property values rise.

Interest-Only Loans in Clearlake, CA