Question 1

Who should use an interest-only loan in Scotts Valley?

Accepted Answer

High earners with variable income — think RSUs, commissions, or bonuses. Also investors who want to manage short-term cash flow.

Question 2

What happens when the interest-only period ends?

Accepted Answer

The loan recasts to principal and interest. Your payment increases, often significantly. You should plan to refinance or sell before that.

Question 3

Can I get an interest-only loan with a 680 credit score?

Accepted Answer

Some lenders go below 700, but terms get worse. Expect a higher rate and larger down payment requirement below that threshold.

Question 4

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

Accepted Answer

Yes. Underwriting is manual and lender-specific. Reserves, down payment, and income documentation requirements are all stricter.

Question 5

Do interest-only loans build equity?

Accepted Answer

Not during the IO period — unless the property appreciates. You're only paying interest, so your balance doesn't go down.

Question 6

Can I use an interest-only loan for a rental in Santa Cruz County?

Accepted Answer

Yes. Some investors pair IO loans with rental properties for short-term cash flow. A DSCR loan may also be worth comparing.

Interest-Only Loans in Scotts Valley, CA