Using interest-only to clear a DSCR floor
Does an interest-only structure raise DSCR enough to clear a lender’s floor?
DSCR is rent divided by payment. An interest-only structure lowers the payment directly by removing principal from it — the most mechanical, most reliable lever available for raising a coverage ratio without touching the rent or the loan amount.
- Interest-only DSCR loan Removing principal from the payment lowers it directly, which raises the rent-to-payment ratio without changing the loan amount or the rent at all.
- Assuming a lower rate is the only way to raise DSCR Rate is one input into the payment, but the amortization structure itself — interest-only versus fully amortizing — is a separate and often larger lever on the payment side of the ratio.
Lenders in the directory
No lender here publishes a rule for this
This is an underwriting judgment, not a published threshold. None of the 37 lenders in the directory states a policy on it, so there is no honest way to build a shortlist — and a list computed only from which products a lender writes would tell you nothing you could act on.
What matters here is how the file is presented rather than which lender receives it. The sections below cover that. When you are ready to approach lenders, the directory shows what each one does publish, with the date it was verified.
Why interest-only moves the ratio so directly
A fully amortizing payment includes both interest and a portion of principal. An interest-only payment on the same loan amount and rate removes the principal portion entirely, which lowers the monthly payment — and since DSCR is rent divided by payment, a lower payment on the same rent produces a higher ratio by definition.
What it does not change
The loan amount, the total interest paid over time, and the fact that principal is not being paid down during the interest-only period are unaffected by this structure — it changes the monthly payment, not the underlying debt. This is a cash-flow lever, not a way to reduce what is owed.
Whether this is published as a stored option in this directory
No lender in this directory tags an interest-only structure as a stored product field, so this page cannot filter a roster on it — whether a specific lender offers an interest-only DSCR option, and on what terms, needs to be confirmed directly.
What to weigh before choosing it
A lower payment today in exchange for no principal reduction during the interest-only period, and typically a rate premium over a fully amortizing loan, is the real tradeoff — useful specifically when clearing a DSCR floor today matters more than paying down the loan.
What to have ready
- A side-by-side DSCR calculation, fully amortizing versus interest-only, on the same loan amount and rate
- A clear plan for the period after any interest-only term ends and principal payments resume
- Confirmation from each lender you are considering on whether interest-only is offered and at what rate premium
Questions
Does interest-only reduce my loan balance faster or slower?
Is interest-only more expensive over the life of the loan?
Do all DSCR lenders in this directory offer interest-only?
Terms used on this page
- Interest-Only DSCR Loan — An interest-only DSCR loan requires only interest payments for an initial period, typically five to ten years, before converting to fully amortising payments for the remaining term.
- Debt Service Coverage Ratio (DSCR) — DSCR is a property’s gross monthly rent divided by its total monthly mortgage payment. A DSCR of 1.00 means the rent exactly covers the payment; 1.25 means rent exceeds the payment by 25%.