Question 1

What happens when my interest-only period ends?

Accepted Answer

Your payment jumps because you start paying principal and interest. Most borrowers refinance or sell before that happens. Plan ahead so you're not surprised by a 30-40% payment increase.

Question 2

Can I pay principal during the interest-only period?

Accepted Answer

Most lenders allow extra principal payments without penalty. You're just not required to make them. Check your loan documents to confirm prepayment terms.

Question 3

Do interest-only loans work for primary residences in Merced?

Accepted Answer

Yes, but they're more common for investment properties. Lenders price primary residence interest-only loans more aggressively. Expect lower rates than on rental properties.

Question 4

How much can I borrow with an interest-only loan?

Accepted Answer

Non-QM lenders typically cap interest-only loans at $3-4 million. That covers most Merced properties. Portfolio lenders sometimes go higher for exceptional borrowers with strong net worth.

Question 5

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

Accepted Answer

Most lenders require 680 minimum. Better rates start at 720+. If you're below 680, focus on raising your score before applying.

Interest-Only Loans in Merced: Lower Payments for Investors and High-Income Borrowers