An interest-only fixed-rate loan is a mortgage in which a borrower pays only interest and nothing towards the mortgage principal. This type of loan is only offered by two HUD multifamily loan programs, the HUD 221(d)(4) program, and the HUD 232 program. In both cases, these loans are offered for up to 3-year periods during the construction phase of a project.

In relation to HUD 232 financing, an interest-only fixed-rate loan is one in which a borrower pays only interest at a fixed rate and nothing towards the principal of their mortgage loan. HUD 232 loans for construction and substantial rehabilitation are interest-only fixed-rate loans during the specified construction period.

The main advantage of an interest-only fixed rate loan is that the interest rate remains unchanged during the entire loan term. This means that the loan will not be affected by fluctuations in the market, and borrowers can expect the same monthly payments throughout the life of the mortgage. This allows borrowers to accurately predict their monthly costs and future expenses, making it easier to budget accordingly.

This type of loan is only offered by two HUD multifamily loan programs, the HUD 221(d)(4) program and the HUD 232 program. In both cases, these loans are offered for up to 3-year periods during the construction phase of a project.

Interest-only fixed-rate loans have several disadvantages. Most importantly, when a borrower isn't paying any of the loan's principal, their loan payments get significantly larger when the amortization period of the loan begins (larger than if it had been amortizing from the start). And, if a borrower isn't ready to handle these payments, they could default on the loan. Also, since a borrower won't have built up any equity in their property during the interest-only period, if property values go down, they could easily find themselves underwater on their mortgage (owing more than the property is worth).

Source: Interest-Only Loans in Commercial Real Estate

In order to be eligible for an interest-only fixed-rate loan, you must meet the eligibility requirements of the HUD 221(d)(4) or HUD 232 loan programs. These requirements include:

• The property must be a multifamily residential property.
• The property must be located in an area that is eligible for HUD financing.
• The borrower must have a satisfactory credit history.
• The borrower must have sufficient financial resources to complete the project.
• The borrower must have a satisfactory record of performance on previous HUD loans.

The repayment terms for an interest-only fixed rate loan depend on the type of loan. For HUD 221(d)(4) and HUD 232 loans, the repayment terms are interest-only payments for up to 3-year periods during the construction phase of a project. After the construction phase is complete, the loan will transition to a fully amortizing loan with principal and interest payments.

An interest-only fixed-rate loan is different from other loan types in that the borrower pays only interest and nothing towards the mortgage principal. This type of loan is only offered by two HUD multifamily loan programs, the HUD 221(d)(4) program and the HUD 232 program. In both cases, these loans are offered for up to 3-year periods during the construction phase of a project. Source and Source.