Interest-Only Loan

Definition

A loan structure where borrowers pay only interest for a specified period before principal repayment begins. It's great for cash flow in the short term until the balloon payment hits and reality sets in.

Example Usage

The commercial construction loan was interest-only for two years, converting to a 25-year amortizing loan at completion.

Origin

From 'interest-only' describing loans where initial payments cover no principal

Fun Fact

Interest-only periods make development projects pencil out better on paper but create refinancing risk—if rates rise or value drops, you're stuck with a problem.

Source: Commercial lending and development finance

Related Terms

Beginner

Curb Appeal

The art of making a house look irresistible from the street so buyers fall in love before noticing the interior looks like a crime scene. A fresh coat of paint and some petunias can apparently add fifty thousand dollars to a listing.

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comp killer

A severely underpriced or distressed sale in a neighborhood that drags down the comparable sales data for everyone else's properties. It's the one house that ruins the curve for the entire class.

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gazundering

The buyer's revenge for gazumping—lowering your offer just before closing when the seller is desperate and has likely already bought their next home. It's financial chicken played with people's entire lives.

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Flip

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metes and bounds

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Advanced

cost approach

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