Interest-Only? 40 Years? Fixed? Extra Extra?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Interest-Only? 40 Years? Fixed? Extra Extra?


Are you a real estate investor?


Do you consider yourself an ordinary or extraordinary investor?


Have you ever thought about an interest-only loan for your rental property?

I'd be willing to bet that even if the ordinary investor learned of a 40-year fixed interest-only loan, he might initially think right back to the heyday of stated income loans and remind himself that there's no way he'd ever get involved in such risky business.  Rest assured that this person doesn't need to change his philosophy.  That's not what I'm going to cover here.  But I am going to discuss the four ways that I see our exclusive and extraordinary 40-year fixed interest-only investment property mortgage being a loan worth careful consideration, especially if our target audience and property consists of a conservative loan-to-value (60% or less) and strong credit profile (760+).


Let's start with some basics.  This loan program has a 40-year total term.  Its rate is fixed the entire time.  At the beginning of the term and for the first 10 years, the borrower is permitted to make an interest-only payment.  There are no prepayment penalties so any amount that the borrower pays above the minimum required interest payment is applied to principal.  And remember, NO RATE CHANGES for 40 years.  Got it?


Here are the ways I see this investor program being a powerhouse:


  1. The investor can "defer" principal paydown until rents are higher.  When this loan "resets" after the interest-only period, the borrower will have a 30-year fixed rate loan (at today's rates!).  But ten years from now, we'd all like to think rents will be higher.  So this investor would essentially be paying down a 30-year fixed rate loan with future, higher rents.  Think about that for a minute.  And if you find the "catch" that all the while and for an additional 10 years this borrower has been paying interest and that over a 40-year term the borrower will certainly pay more cumulative interest, you are correct.  However, how has the opportunity to pay less in the first ten years benefited the investor?  Has he parlayed today's savings into anything other financial gain?
  2. The investor has maximized flow but conceded nothing in fixed years.  As above, from years one through ten and while rents are lower, this borrower/landlord has benefited from a much lower payment and this can make the difference between cash-flow positive and cash-flow negative.
  3. Our borrower preserves today’s low rates well into the future, though if rates and rents continue to rise, the benefit grows.
  4. NOTHING prevents the borrower from prepaying the 40-year loan.  In short, this can simply be a 30-year fixed rate loan too.  If this investor made a fully-amortized payment from Day 1, there would be no difference between this loan and a standard 30-year fixed loan.  So in essence, this program affords an option to make a lower payment and to electively determine a strategy for pay down over time.  It gives our investor more flexibility and for those who have an intent to perhaps manage a portfolio of properties, this might be a very appealing feature.


Now you might be saying, "Well, this all sounds pretty good. I'd sure like to see some math on this, Rob."  And I'd love to indulge you on that, but I'm afraid the regulators of our industry would be all too happy to jump on my back if I gave you specifics.  They'd need me to disclose terms, APR's, etc., and it's just impractical to attempt to do it here, so get in touch any time and I'll be happy to demonstrate mathematically how this loan program would work in your situation.  I have done extentsive analysis to demonstrate the points above and they are both compelling and though-provoking.


A pattern I have observed in my career is that the savvy investor never sleeps.  He/she is always thinking about ways to make money go farther, do more, and work smarter.  Our 40-year fixed interest-only investor loan should be on this person's financial radar because it defies stereotype, provides flexibility with limited risk and lives up to its extraordinary billing.


Very Interest-ing, 



Robert J. Spinosa
Executive Loan Advisor
NMLS: 22343 
Cell/Text: 415-367-5959 Fax: 415-366-1590 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941


LendUSA, LLC dba RPM Mortgage NMLS #1938   Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. 


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Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

This is certainly enticing to say the least. Is it available in all 50 states?

Jul 28, 2017 09:00 AM #1
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Rob - That sounds like a great deal for the right borrower, as it provides a way to maximize long-term leverage with reasonable risk. And I think betting on today's rates is also a good long-term play. Thanks for the information and I'll keep this in mind.

Jul 28, 2017 02:25 PM #2
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

This makes you want to go out and use this loan....

Jul 28, 2017 03:07 PM #3
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

I think it is great for investors, not sure so good for an owner occupied home though. Is this avaiable in all states?

Jul 28, 2017 04:26 PM #4
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Rob, very interesting indeed, so with that said nice to see you back on the platform, or have we just been running in different time zones of blogosphere?:)Endre

Jul 28, 2017 06:59 PM #5
Stavrula "Sam" Crafa, RNC,GRI, CDPE, PSA
Future Home Realty - Seminole, FL
Providing the integrity and service you deserve.

Interesting information. Haven't heard of that in Florida. Must look into it. Congratulations on the featured post

Jul 28, 2017 09:27 PM #6
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

I too would like to know if this is available in all states...  very interesting post!

Jul 29, 2017 12:00 AM #7
Mark Neighbor

Great read and this is really thinking out of the box. As an investor, I am always looking at the math in order to make more money and for longer periods of time. I have witnessed a 40 year fixed mortgage save a lady from foreclosure in Georgia. The amount of money it saved her monthly, allowed her to keep her rental house and improve her rental income.

Jul 29, 2017 01:12 AM #8
Mark Neighbor
A O Home Solutions - Sell House Georgia - Buy House Georgia - McDonough, GA
Sell House Fast In Georgia

Great read and this is really thinking out of the box. As an investor, I am always looking at the math in order to make more money and for longer periods of time. I have witnessed a 40 year fixed mortgage save a lady from foreclosure in Georgia. The amount of money it saved her monthly, allowed her to keep her rental house and improve her rental income.

 Mark Neighbor and

Jul 29, 2017 01:14 AM #9
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

Very interesting new information for me.

For the right investor this could be a great product to move their business forward.

Is it available in all states?

Thanks for sharing.

Jul 29, 2017 06:07 AM #10
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Rob, I am going to contact you. My business is exclusivly investors and all are out of state or out of country. I will be in San Francisco to speak at a quarterly investmeotr meeting that is usually 150 to 200 investors. This could be interesting. Expect an email from me.

Jul 29, 2017 08:20 AM #11
Keller Williams Realty - Rochester, NY
Save The Most Money When Buying, Selling & Owning!

Would you and your company be able to forge a correspondence agreement in New York State? Who could discover whether the program would be approved in New York?

Jul 29, 2017 06:44 PM #12
Pat Braithwaite
Braithwaite Realty - Marietta, GA

Rob, Great post. I will need to let my investors know.  It may sell another house or 2. Pat

Jul 30, 2017 05:38 AM #13
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Is this type of loan available for commercial properties? What are the loan limits for purchase or refi residential and DTI to qualify if LTV is 60 and credit above 760?

Jul 30, 2017 09:29 AM #14
Dolores "Dee" Mauriello
Keller Willaims - Wayne, NJ
Realtor, Homes For Sale Wayne NJ

We could use this program in NJ

Aug 02, 2017 06:38 PM #15
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

Rates are still low and as long as they stay under 6%, most of the buyers decision what to buy likely will not be affected. 

Jan 20, 2018 12:43 PM #16
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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