Question 1

Do I ever pay down the principal during the IO period?

Accepted Answer

No. During the interest-only period, payments cover interest alone. Principal balance stays the same until that period ends.

Question 2

What happens when the interest-only period ends?

Accepted Answer

Payments recalculate to cover both principal and interest. Expect a noticeable jump — plan ahead or refinance before then.

Question 3

Can I use an interest-only loan for a Solvang vacation rental?

Accepted Answer

Yes. Many investor buyers use IO loans on vacation properties. Lender terms vary, so qualifying criteria will differ.

Question 4

Is a large down payment required?

Accepted Answer

Most IO lenders want 20–30% down. Higher down payments also improve your rate and reduce lender risk concerns.

Question 5

Are interest-only loans harder to qualify for than conventional?

Accepted Answer

Yes. These are non-QM loans with no government backing. Lenders apply their own, often stricter, underwriting standards.

Interest-Only Loans in Solvang, CA