Who this is for
- Investors maximizing cash flow on rentals
- High-income borrowers with variable income
- Buyers planning to sell or refinance before the interest-only period ends
Typical Interest-Only Mortgages requirements
| Interest-only period | Often 10 years |
|---|---|
| Loan types | Jumbo, non-QM, DSCR |
| Down payment | Usually 20%+ |
| Qualifying | Often on the fully amortizing payment |
Figures are typical market ranges as of October 2026. Actual terms depend on the lender, your credit, the property and the program, and are confirmed on your Loan Estimate or term sheet.
How it works
- Pay interest only for the initial period.
- Payments reset to amortize the balance over the remaining term.
Pros and cons
Advantages
- Lower initial payment
- Better DSCR on rentals
Trade-offs
- No principal paydown during the IO period
- Payment increases later
Documents you’ll need
- Depends on the underlying program
Interest-Only Mortgages FAQ
Can I pay principal during the interest-only period?
Usually yes, and doing so lowers the balance and future payment.
How does an interest-only mortgage work?
For the first 10 years (commonly), you pay only interest. After that, payments reset to pay off the balance over the remaining term, so the payment jumps.
How much does the payment increase after the IO period?
A lot. On a $500,000 loan at 7%, interest-only is about $2,917 a month. When it resets to amortize over 20 years, it jumps to roughly $3,877. Plan for it.
Who should consider interest-only?
Investors maximizing rental cash flow, high earners with uneven income, and buyers who plan to sell or refinance before the reset. It is not for stretching into a payment you cannot afford later.
Do interest-only loans require a bigger down payment?
Usually yes, 20% or more. Lenders want a cushion since the balance does not shrink during the IO period.
Can I get interest-only on a primary home?
Yes, mainly through jumbo and non-QM programs. Conventional conforming loans do not offer it.
How do lenders qualify you for an interest-only loan?
Often on the fully amortizing payment, not the interest-only payment. That keeps borrowers from qualifying on a payment that will not last.
Is interest-only risky?
The risk is the reset. If rates rise or your plans change, the higher payment can hurt. It works best with a clear plan: sell, refinance or pay down principal during the IO years.
Interest-only vs adjustable rate: which is better?
They solve different problems. Interest-only lowers the payment without touching principal. An ARM lowers the rate for a fixed period. Some loans combine both.
Official sources
How Interest-Only Mortgages compare
| Interest-Only Mortgages | DSCR Loans | Jumbo Loans | Non-QM Loans | |
|---|---|---|---|---|
| Best for | Investors maximizing cash flow on rentals | Investors whose tax returns show low income after write-offs | Luxury and high-cost-market purchases | Self-employed borrowers |
| Down payment | Usually 20%+ | 20–25% down; up to 80% LTV on purchase | Typically 10–20% | , |
| Credit | , | Typically 620–680 (some programs 600) | Typically 680–720+ | Typically 600–680 depending on program |
| Income docs | , | , | , | , |
Typical ranges, your Loan Estimate or term sheet confirms actual terms.
Coming soon: a 2-minute walkthrough from our loan team.
Related programs
DSCR Loans
A DSCR loan is an investment-property mortgage that qualifies you on the property’s rental income divided by its monthly payment (the debt service coverage ratio).
Jumbo Loans
A jumbo loan is a mortgage larger than the FHFA conforming loan limit for your county, used for higher-priced homes.
Non-QM Loans
A non-QM (non-qualified mortgage) loan is any mortgage that documents income or credit outside the standard Qualified Mortgage rules, using bank statements, a P&L, 1099s, assets or rent instead of W-2s and tax returns.