Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment increases to cover principal and interest over the remaining term. On a $4M loan, expect your payment to jump $3,000-$5,000 per month depending on remaining years and rate.

Question 2

Can I refinance before the IO period ends?

Accepted Answer

Yes, but you need equity and qualifying income at that time. Don't assume rates or your financial situation will allow it—plan for the payment increase as your baseline scenario.

Question 3

Do interest-only loans make sense for primary residences in Atherton?

Accepted Answer

They work well if you have variable income, plan to move within 5-7 years, or want liquidity for investments. Long-term owners usually prefer building equity through standard amortization.

Question 4

How much higher are interest-only loan rates?

Accepted Answer

Expect 0.5-1.5% above comparable jumbo loans. Rates vary by borrower profile and market conditions, so actual pricing depends on your credit, assets, and down payment.

Question 5

What reserves do lenders require for Atherton properties?

Accepted Answer

Most lenders want 12-24 months of payments in liquid reserves. On larger loans or unique properties, some require 24+ months to offset the deferred principal risk.

Interest-Only Loans in Atherton: Lower Payments on Premium Properties