Question 1

What happens after the interest-only period ends?

Accepted Answer

Your payment jumps to include principal, often increasing 30-50%. Most borrowers refinance or sell before that happens. If you keep the loan, it amortizes over the remaining term at a higher monthly cost.

Question 2

Can I make principal payments during the interest-only period?

Accepted Answer

Yes. Most interest-only loans allow extra principal payments without penalty. You control when and how much equity you build while keeping the minimum payment low.

Question 3

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

Accepted Answer

Absolutely. High earners use them to maximize cash flow for renovations, investments, or business capital. Just ensure you can handle the full payment when principal kicks in.

Question 4

How much can I save monthly with an interest-only loan?

Accepted Answer

Payments run 20-40% lower than fully amortizing loans during the interest-only period. On a $900,000 loan, that's $1,500-3,000 less per month depending on your rate.

Question 5

Are interest-only loans adjustable or fixed rate?

Accepted Answer

Most are adjustable after an initial fixed period. You might get 10 years interest-only with a rate fixed for 5 or 7 years, then annual adjustments. Fixed-rate interest-only exists but costs more.

Interest-Only Loans in Goleta: Lower Payments for Homebuyers Who Think Strategically