What is one major benefit of an Interest-Only loan?

An Interest-Only loan has the distinct advantage of lower initial debt service payments. This characteristic stems from the fact that borrowers only pay the interest on the loan for a specified period, which means the principal balance remains unchanged during that time. As a result, the monthly payments are significantly reduced when compared to traditional loans that require both principal and interest payments from the outset.

This lower initial payment structure can be particularly beneficial for borrowers seeking to manage cash flow effectively in the short term, allowing them to allocate the funds elsewhere—such as reinvesting in the property, funding other investments, or covering operational costs. The strategy is often appealing in situations where the property is expected to appreciate in value or generate income over time, providing the borrower with an opportunity to pay off the principal at a later date without the added pressure of high payments initially.