Question 1

How long does the interest-only period last?

Accepted Answer

Most IO loans have a 5 or 10-year interest-only period. After that, the loan recasts and you pay principal plus interest on the remaining balance.

Question 2

Do I build any equity during the IO period?

Accepted Answer

Not through payments — you build zero equity that way. You only gain equity if the property value increases.

Question 3

What credit score do I need in Palo Alto for an IO loan?

Accepted Answer

Most non-QM lenders want 700 or higher. Some programs go lower, but expect a higher rate and more required reserves.

Question 4

Can I use an IO loan for an investment property in Palo Alto?

Accepted Answer

Yes. IO loans work for non-owner-occupied properties. Reserve requirements are typically stricter for investment deals.

Question 5

Is an interest-only loan risky?

Accepted Answer

The main risk is payment shock when the IO period ends. Payments increase significantly — plan your income or exit strategy around that date.

Question 6

Are interest-only loans still available in 2026?

Accepted Answer

Yes, as of April 2026 they are available through non-QM and portfolio lenders. They're not widely advertised — a broker is usually the fastest way to find them.

Interest-Only Loans in Palo Alto, CA