DSCR loans
Interest-Only and ARM DSCR Loans: When They Make Sense
Interest-only and adjustable structures can lower your payment and lift your DSCR, but only suit certain plans. Here is how to judge them.
Most investors default to a thirty-year fixed DSCR loan, and for a long hold that is usually right. But two other structures, interest-only and adjustable-rate, exist for good reasons, and knowing when they fit can make a marginal deal work or save you money on a short hold.
Interest-only
An interest-only loan has you pay only the interest for a set period, often the first several years, before payments step up to include principal. The payment during the interest-only period is lower, which means a higher measured DSCR, since the lender tests that lower payment.
The trade is that you build no equity during that period, and the payment rises later. Interest-only fits an investor who plans to sell or refinance before the step-up, or who wants to maximize early cash flow and has a clear plan for the increase. It does not fit a buy-and-forget long-term hold.
Adjustable-rate (ARM)
An adjustable-rate DSCR loan starts at a lower rate that is fixed for an initial period, often five years, then adjusts with the market. As of mid-2026, adjustable DSCR rates ran below fixed ones, which is the appeal: a lower payment now. The risk is that the rate can rise after the fixed period.
Match the structure to the hold. An ARM or interest-only loan can be the cheaper, smarter choice if you intend to sell or refinance within the fixed or interest-only window. For a property you plan to hold for decades, the certainty of a thirty-year fixed is usually worth its slightly higher rate.
See current fixed and adjustable ranges in the Rate and Terms Survey, and read how structure factors into pricing in the rates guide.