Interest-Only
A loan period during which only interest is paid, with the principal amount repaid at a later stage.
Interest-only financing allows a borrower to service only the accrued interest on the borrowed capital for a defined period, postponing full repayment of the principal to a future date. This deferred capital repayment typically occurs in a lump sum or through refinancing.
This structure is common in commercial real estate transactions, particularly for development projects or acquisitions where operating cash flow builds gradually. It preserves liquidity during the initial investment and stabilization phase.
- Typical duration: 1 to 5 years
- Common uses: property development, investment portfolios, major renovations
- Key consideration: significant balloon payment upon maturity
