> ## Documentation Index
> Fetch the complete documentation index at: https://cameron.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# Interest-Only Options

> Understanding interest-only payment structures for self-employed mortgages

Interest-only loans allow you to pay just the interest for a set period, resulting in lower initial payments. Many lenders specializing in self-employed borrowers offer this option for borrowers seeking cash flow flexibility.

## How It Works

During the interest-only period (typically 5 or 10 years), your payment covers only interest—no principal reduction. After this period, the loan converts to fully amortizing payments over the remaining term.

**Example on a \$500,000 loan at 7.5%:**

| Period                     | Monthly Payment |
| -------------------------- | --------------- |
| Years 1-10 (interest-only) | \$3,125         |
| Years 11-30 (amortizing)   | \$4,028         |

The tradeoff: you're not building equity during the interest-only period, and payments increase when it ends.

## Who Benefits from Interest-Only

* Borrowers with variable income who want lower base payments
* Investors prioritizing cash flow over equity building
* Those planning to sell or refinance before the IO period ends

## Important Considerations

**Qualification:** Lenders qualify you based on the fully amortized payment, not the interest-only payment. This means interest-only doesn't increase borrowing power—it just reduces initial payments.

**Requirements:** Some lenders require higher credit scores, lower LTV, or additional reserves for interest-only loans.

**Payment shock:** Be prepared for a significant payment increase when the interest-only period ends—often 25-30% higher.