Initial cash-flow structure
Interest-Only DSCR Loan Rates
An eligible interest-only DSCR structure can reduce the initial scheduled payment because principal is not paid during the interest-only period. The remaining balance, later payment, rate, APR, and exit strategy must be reviewed together.
Understand both the initial payment and what follows.
During an interest-only period, scheduled payments cover interest rather than reducing the loan principal. The unchanged balance can matter when you sell, refinance or begin repaying principal. A lower initial payment is not the same as a lower total borrowing cost.
Ask how long the interest-only period lasts and what the contract requires afterward: amortizing payments, a balloon payoff or another repayment schedule. The payment can increase substantially when principal repayment begins. Compare that later payment as well as the initial one, and do not rely on a future refinance being available.
What changes during an interest-only period.
Initial payment
The scheduled payment generally covers interest and does not reduce principal during the IO period.
Outstanding balance
The principal balance remains unless voluntary principal payments are allowed and made.
Later payment
The payment can increase when amortization begins or if an adjustable rate changes.
DSCR and cash flow
The lower initial payment may improve the initial calculated DSCR, subject to program rules.
Compare interest-only carefully.
- Length of the interest-only period.
- Fixed or adjustable rate mechanics.
- Payment after the IO period ends.
- Expected property hold or refinance timeline.
- Points, prepayment terms, reserves, and total cost.
Cash flow is not the only objective.
Interest-only can preserve near-term cash flow, but it also delays principal reduction. The appropriate comparison includes investment returns, equity strategy, future payment risk, exit assumptions, and the complete loan cost.
Related DSCR rate guides.
Continue your rate research with the most relevant comparison pages.
Build a DSCR rate review around the actual property.
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Business-Purpose Investment Financing
This website presents financing options intended for eligible non-owner-occupied investment properties and business purposes only. The subject property may not be occupied by the borrower or the borrower’s family when prohibited by the applicable program. Loan proceeds may not be used for personal, family, or household purposes. Program availability, occupancy requirements, terms, and eligibility are subject to underwriting, property review, state restrictions, and lender approval.