Interest-only loans, and the payment step nobody mentions.

An interest-only mortgage lets you pay only the interest for an agreed opening period, commonly five to ten years, before the loan converts to full principal-and-interest payments for the remainder of the term. The appeal is obvious - the early payment is materially lower than on a comparable amortising loan. What's less obvious is that during that period the balance doesn't fall at all. You're not building equity through the payment, only through whatever the market does to the property's value, and the entire principal still has to be repaid.

What Happens at Recast

The step at the end is the part to understand before you sign. When the interest-only period finishes, the full balance amortises over the years that remain rather than over a fresh full term - so a thirty-year loan with ten years of interest-only repays its whole principal across the final twenty, and the payment rises accordingly. Interest-only features fall outside the Qualified Mortgage definition, which makes these non-QM loans; the lender must still satisfy the federal ability-to-repay rule, and a careful one will assess you against the higher post-recast payment rather than the introductory one. That's a good sign in a lender, not an obstacle. The structure genuinely suits borrowers with lumpy or bonus-weighted income, and suits almost nobody who simply wants a cheaper payment than they can afford.

If you would like to explore whether an interest-only loan matches your purchase price, credit profile and long-term budget, reach out to 3E Lending to speak with our licensed Texas mortgage team in Katy.