Interest-only payments: understand what happens next.

Interest-only describes the payment

During an interest-only period, scheduled payments cover interest without paying down principal. A lower required payment during that period does not mean the loan balance is being reduced.

Depending on the loan terms, the end of that period can bring larger payments or a balance that must be repaid. The CFPB cautions against assuming you will be able to sell or refinance when payments increase.

CFPB: What is an interest-only loan? ↗

Request the whole payment schedule

Ask how long the interest-only period lasts, whether the rate can change, how principal will be repaid and what happens at maturity. Compare the same loan amount and assumptions when looking at an amortizing alternative.

For an investment property, keep operating costs and periods without rent in the discussion. A smaller modeled mortgage payment does not make the rental automatically eligible or profitable.

Match the conversation to the property

Use Reside for your own home and Invest for a business-purpose property. Explain your planned holding period and repayment strategy so Luke can review whether an available structure fits the scenario.

The public DSCR tool currently models a fully amortizing loan. Do not use its result as an interest-only offer; ask for a separate review of that structure.