Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment jumps to cover principal and interest over the remaining loan term. Most borrowers refinance before this happens or sell the property.

Question 2

Can I pay principal during the interest-only period?

Accepted Answer

Yes, most lenders allow extra principal payments without penalty. This builds equity while keeping the required payment low.

Question 3

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

Accepted Answer

Yes, though they're more common for investment properties. You'll need strong income and credit to qualify for a primary residence.

Question 4

How much lower is the interest-only payment?

Accepted Answer

Typically 20-30% lower than a fully amortizing loan. A $1M loan saves roughly $1,500-$2,000 monthly during the IO period.

Question 5

Can I refinance out of an interest-only loan?

Accepted Answer

Yes, if property values hold and rates stay reasonable. Refinancing before the IO period ends avoids payment shock.

Interest-Only Loans in Monterey: Lower Payments for High-Income Earners