Interest Only Investor Loans (IO DSCR)
10 year interest only period followed by 20 year amortization. Maximize monthly cash flow during the IO window. Designed for cash flow focused landlords + BRRRR investors planning a refi exit.
Sources: DSCR Loans Hub
What's the cash flow benefit of an interest only investor loan?
On a $400K loan at 7.50%: amortizing 30 yr payment = $2,797/month. Interest only payment = $2,500/month. IO saves $297/month ($3,564/year) during the IO window. Trade off: IO rates run 25 to 50 bps wider than amortizing, post IO payment resets higher (10 yr IO reset = ~$3,224/month at amortization start). Best fit: cash flow focused landlords + BRRRR investors planning refi within 5 to 10 years. Wrong for: 20+ year long hold operators.
, PeerSense Capital Advisory · 2026-05-01
Cash flow comparison, $400K loan @ 7.50%
| Metric | Amortizing 30 yr | 10 yr IO + 20 yr Amort |
|---|---|---|
| Monthly payment (years 1-10) | $2,797 | $2,500 |
| Annual cash flow improvement | - | +$3,564/yr |
| Total saved in IO period | - | +$35,640 |
| Monthly payment (years 11-30) | $2,797 | $3,224 (reset) |
| Lifetime payment difference | Baseline | +$15K vs. baseline (reset effect) |
| Best fit | Long-hold + retirement | BRRRR + cash-flow-focused |
Indicative cash flow comparison only. Actual rates + terms vary by borrower, property, and current market conditions.
Frequently asked questions
What is an interest only investor loan?+
A 30 year DSCR rental loan with an IO period (typically 10 years) followed by amortization for the remaining 20 years. Lower payment during IO; payment resets higher post IO.
What's the IO vs amortizing payment difference?+
On $400K at 7.50%: amortizing $2,797/mo vs IO $2,500/mo = $297/mo savings. After IO ends, payment resets to $3,224/mo (20 yr amort).
When does interest only make sense?+
Cash flow focused landlords, BRRRR investors planning refi within 5 to 10 years, properties with rent growth thesis, investors deploying principal dollars into next acquisition instead of building equity here.
When does IO NOT make sense?+
Long hold operators (20+ year hold), uncertain rent growth, falling rate environments where you'll refi to amortizing soon, retirement income focused borrowers building equity.
What's the IO rate vs amortizing rate?+
IO rates 25 to 50 bps wider than amortizing. May 2026: amortizing DSCR 6.75 to 8.75% vs IO DSCR 7.00 to 9.25%.
What's the standard IO period length?+
10 years is most common. Programs offer 5 year IO (lower rate premium) or 15 year IO (higher rate premium).
How does the post IO payment reset work?+
After IO ends, loan reamortizes over remaining term using locked in rate + current balance. $400K at 7.50% with 10 yr IO resets to ~$3,224/mo (20 yr amort), $724 higher than original IO payment.
Can I prepay an IO loan early?+
Yes, typically step down prepay schedule (5 4 3 2 to 1% over years 1 to 5) or 3/2/1. Some programs offer open prepay during IO period at slight rate premium.