Interest-Only Mortgages in 2026: Who Offers Them, Who Qualifies, and When They Make Sense

An interest-only mortgage allows the borrower to pay only the interest portion for a defined period, typically 5 to 10 years, before the loan converts to fully amortizing payments. The appeal is lower initial monthly payments. The risk is that the borrower builds no equity through amortization during the IO period and faces a payment increase when the principal repayment begins.

Where Interest-Only Is Available in 2026

Interest-only is not available on conventional conforming loans (Fannie Mae and Freddie Mac do not purchase IO mortgages) or on FHA, VA, and USDA loans. It is available on jumbo loans through portfolio lenders and on non-QM DSCR investor loans. Agency guidelines have categorized IO as a higher-risk feature and excluded it from qualified mortgage (QM) guidelines, which effectively removed it from the conventional market after 2014.

Lenders Offering Interest-Only in 2026

• ✦Angel Oak: IO option on DSCR investor loans; 660+ FICO required for IO
• ✦Acra Lending: IO available on DSCR; 5/1, 7/1, and 10/1 IO ARM structures
• ✦Griffin Funding: IO on jumbo and non-QM; primary, second home, and investment
• ✦Change Wholesale: IO on investor DSCR; 640+ FICO
• ✦Verus Mortgage Capital: IO on non-QM investor solutions up to $3.5M
• ✦Most jumbo portfolio lenders: IO periods of 5-10 years are standard on large loans

How Qualification Works on IO Loans

Most lenders qualify the borrower at the fully amortizing payment, not the IO payment. This is the standard post-2010 approach to prevent IO loans from being used to stretch qualification. The underwriter calculates what the payment will be when principal repayment begins and uses that figure for DTI. Some non-QM lenders calculate DSCR on the IO payment, which produces a higher DSCR ratio and may allow a property with borderline cash flow to qualify.

When an IO Period Is Genuinely Useful

• ✦DSCR investor with positive cash flow: lower IO payment increases monthly cash flow and improves yield during the hold period
• ✦High-income borrower with variable annual compensation: IO minimizes required monthly payment when cash is needed for other investments
• ✦Short planned hold period: if the investor plans to sell or refinance in 5-7 years, IO avoids paying down principal that will not be recaptured
• ✦New construction closing: IO period during construction or initial lease-up while the property is not yet generating full rent
• ✦Jumbo primary with heavy bonus income: borrower can make principal curtailments in large bonus years and keep the base payment low