How long is the interest-only period?

Ten years on the current sheet, followed by twenty years of amortisation.

Does IO change the loan term?

No. The term stays thirty years; the repayment is compressed into the last twenty.

Can I pay principal voluntarily during the IO period?

Generally yes, subject to the prepayment terms. Ask before relying on it.

Is DSCR qualified on the IO payment?

Yes, on Silt's sheet the qualifying payment is the interest-only payment.

No. It is fixed at closing, so choose deliberately.

LESSON 2 OF 64 MIN READ

When does interest-only make sense on a rental loan?

Interest-only removes the principal portion from your monthly payment, which lowers PITIA, raises DSCR — commonly by 0.10 to 0.20 — and increases monthly cash flow. On Silt's sheet a ten-year interest-only period costs 25 basis points, and the loan then amortises over the remaining twenty years, which makes the payment step up noticeably. It is a genuine tool for a thin ratio or a cash-flow strategy, and a genuine cost if you simply take it by default.

THE NUMBERS

Minimum DSCR	0.75 (0.75–0.99 prices at +62.5 bps, 70% LTV cap)
Maximum LTV	80% purchase or rate-and-term · 75% cash-out
FICO floor	660 (below that the desk does not lend)
Loan size	$100K – $3M single · $10M portfolio
Reserves	6 months PITIA · 12 months on a portfolio
Prepay options	5-4-3-2-1 par · 3-2-1 +25 bps · 1-yr +50 bps · none +87.5 bps
Typical days to close	21–30 days from a signed term sheet
Rate sheet	Silt Rate Desk — Market Composite Sept 2026 · effective 2026-09-01

ILLUSTRATIVE — published program floors, not a quote or a commitment to lend. Subject to underwriting, appraisal and final credit approval.

What actually changes

During the interest-only period you pay interest on the full balance and nothing else, so the balance does not fall. Taxes, insurance and HOA continue as normal — interest-only affects the P and the I line only. At the end of the period the loan re-amortises over the remaining term, so the same balance is now repaid over twenty years instead of thirty, and the payment rises by more than most borrowers expect.

The ratio effect, quantified

On a $300,000 loan at 7%, the amortising payment is about $1,996 and the interest-only payment is $1,750 — $246 a month lighter. Against a $600 fixed cost and a $2,900 rent, DSCR moves from about 1.12 to about 1.23, crossing a pricing band. That is the case for interest-only in a sentence: it can pay for its own 25 basis points and then some, on a thin file.

When it is the right structure

Three cases. A stabilising property whose rent is still climbing, where the extra coverage buys time. A cash-flow strategy where the investor deliberately keeps monthly outgoings low and builds wealth through acquisitions rather than amortisation. And a bridge in intent — a property you expect to sell or refinance within the IO window, so principal you never repay is principal you never needed to fund.

When it is the wrong structure

If you plan to hold the property for thirty years and value the debt paydown, interest-only costs you rate and a decade of equity build for a benefit you did not need. If your exit depends on refinancing before the step-up, you are taking rate risk on a date you do not control. And if the ratio only clears on the interest-only payment, the file is telling you something about the deal, not about the structure.

The step-up, priced

On that same $300,000 at 7%, the payment goes from $1,750 during the interest-only period to roughly $2,326 when the loan amortises over the remaining twenty years — an increase of about $576 a month, on a balance that is exactly where it started. Rent will usually have grown over ten years, but plan for the step-up as a known event with a date rather than a surprise.

How it interacts with everything else

The 25 basis point cost stacks with your other adjustments, and the improved ratio may simultaneously remove a band adjustment — so the net rate change can be small or even favourable. Prepayment terms run on their own clock and are unaffected. Run both structures side by side on the same sheet before choosing; the answer differs by deal, not by preference.

Amortising versus interest-only on the same loan

Loan amount	$300,000 · 30-year term
Rate, amortising	7.000%
Payment, amortising	$1,996 / mo
Rate, 10-year IO (+0.25%)	7.250%
Payment during IO	$1,813 / mo
Taxes + insurance	$600 / mo
DSCR at $2,900 rent — amortising	1.12
DSCR at $2,900 rent — IO	1.20
Payment after IO ends (20-yr amortisation)	≈ $2,372 / mo

The IO structure crosses into the par band here, which can offset part of its own cost. Illustrative only.

WHAT WE NEED FROM YOU

Nothing extra. Interest-only is a structure choice, not a documentation category.
Your hold plan. Tell the desk your intended horizon so the structure matches it.

FREQUENT QUESTIONS

How long is the interest-only period?: Ten years on the current sheet, followed by twenty years of amortisation.
Does IO change the loan term?: No. The term stays thirty years; the repayment is compressed into the last twenty.
Can I pay principal voluntarily during the IO period?: Generally yes, subject to the prepayment terms. Ask before relying on it.
Is DSCR qualified on the IO payment?: Yes, on Silt's sheet the qualifying payment is the interest-only payment.
Can I switch later?: No. It is fixed at closing, so choose deliberately.

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