Interest-Only (IO) Loan
A loan structure where the borrower pays only interest (no principal) for a set period — typically 5 or 10 years on a DSCR loan. The IO payment is 25–35% lower than a fully amortizing P&I payment, lifting both monthly cash flow and qualifying DSCR. See Interest-Only DSCR →
Why it matters on a DSCR loan
The IO option is one of the most powerful levers in DSCR lending because many programs qualify the loan on the lower IO payment, turning a borderline sub-1.0 deal into a passing one. It suits investors who prioritize monthly cash flow or plan to sell or refinance before the IO period ends. The mistake to avoid is ignoring the payment shock when the loan converts to principal-and-interest amortized over the remaining term — model that future payment now, and have a refinance or disposition plan before the IO window closes.
Related terms
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DSCR Calculator Get a QuoteReviewed by Arin Baghermian, Broker Owner — NMLS #1220456 · Last reviewed July 2, 2026 · DSCR Capital Partners is a brand of UTM Financial, LLC (NMLS #2591548).