Question 1

Am I building equity during the interest-only period?

Accepted Answer

Not through payments — only through appreciation. You owe the same principal balance until the IO period ends.

Question 2

Can I pay down principal early if I want to?

Accepted Answer

Most IO loans allow voluntary principal payments. Check your loan terms — some carry prepayment restrictions.

Question 3

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

Accepted Answer

Most lenders want 680 or higher. Stronger credit scores open better rates. Rates vary by borrower profile and market conditions.

Question 4

Do interest-only loans work for Nevada City investment properties?

Accepted Answer

Yes. IO loans can lower carrying costs on rentals or fix-and-hold investments. They pair well with DSCR structures for investors.

Question 5

What happens when the interest-only period ends?

Accepted Answer

The loan recasts. Your payment rises to cover principal and interest on the full remaining balance over the remaining loan term.

Question 6

Is an interest-only loan harder to get than a conventional loan?

Accepted Answer

Yes. It's non-QM, so underwriting is stricter. Reserves, credit, and down payment requirements are all higher than conventional.

Interest-Only Loans in Nevada City, CA