Interest-Only (IO) Period
An interest-only period is a stretch of a loan — often the first one to five years, or the full term on bridge loans — during which payments cover interest but no principal. IO lowers the payment, which raises cash-on-cash returns and DSCR, but the loan balance doesn't shrink, leaving a larger balloon at maturity.
Lenders grant IO more readily on lower-leverage loans, where the missing amortization poses less risk. Full-term IO is common on loans below roughly 65% LTV.
When comparing quotes, treat IO as a cash-flow timing benefit, not free money: the principal is simply deferred, and the effective cost of the loan may still be higher once fees and the exit are counted.