Interest-Only Loan is a loan where payments cover only accruing interest, not principal reduction, for a defined IO period. Common DSCR structure: 10-year IO followed by 20-year amortizing (40-year total). IO reduces monthly carrying cost (PITI), improves DSCR ratio, and lets the investor preserve cash flow for portfolio growth. Trade-off: principal balance doesn't pay down, so equity grows only through appreciation.
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