I/O periods (3, 5, 7, 10 years) lower the payment and boost DSCR — powerful for investors optimizing cash flow now. After I/O ends, payments jump because principal must amortize over the remaining term.
Loan Mechanics
Interest-Only (I/O)
A loan where you pay only interest for an initial period, then start amortizing principal.
More in Loan Mechanics
- DSCR (Debt Service Coverage Ratio)— The ratio of a property's net operating income to its debt payments — a 1.25 DSCR means th…
- LTV (Loan-to-Value)— Loan amount divided by the property's appraised value, expressed as a percent.
- LTC (Loan-to-Cost)— Loan amount divided by total project cost (purchase + rehab).
- ARV (After-Repair Value)— The projected appraised value of a property after planned renovations are complete.
- DTI (Debt-to-Income Ratio)— Your total monthly debt payments divided by gross monthly income.
- APR (Annual Percentage Rate)— The all-in yearly cost of a loan, including interest rate plus most fees.