When is the principal repayment typically waived in an Interest-Only loan structure?

In an Interest-Only loan structure, the principal repayment is typically waived until the loan matures. This means that during the initial phase of the loan, the borrower is only required to make interest payments, which can provide flexibility and lower initial cash outflows. This structure allows borrowers to free up capital for other investments or expenses during the life of the loan.

Once the loan matures, the borrower will need to repay the principal in a lump sum, which is often a significant financial obligation. This type of loan is particularly useful for borrowers who anticipate that their financial situation will improve over time, allowing them to handle the principal repayment at maturity. The design of such loans makes them attractive for specific investment strategies, especially in real estate financing where property values can appreciate, offering the potential for increased returns on investment.