Question 1

How long is the interest-only period?

Accepted Answer

Typically 5 to 10 years, depending on the lender and loan structure. After that, payments fully amortize over the remaining term.

Question 2

Do I build any equity during the IO period?

Accepted Answer

Only if your property appreciates. You're not paying principal, so loan balance stays flat unless the market moves.

Question 3

What credit score do I need for an IO loan?

Accepted Answer

Most lenders want 700 or higher. Some portfolio lenders go lower with compensating factors like large reserves.

Question 4

Can I pay principal during the interest-only period?

Accepted Answer

Yes, most programs allow voluntary principal payments. You're just not required to make them during the IO period.

Question 5

Are interest-only loans risky?

Accepted Answer

They carry more risk than fully amortizing loans. Payment increases at the end of the IO period can be significant — plan ahead.

Question 6

Is an interest-only loan right for Monte Sereno buyers?

Accepted Answer

It depends on your income structure and investment horizon. High earners with variable comp often benefit most from this structure.

Interest-Only Loans in Monte Sereno, CA