An interest-only fixed-rate loan is a mortgage in which a borrower pays only interest and nothing towards the mortgage principal. Interest-only fixed-rate loans are 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 benefit of an interest-only fixed-rate loan is that borrowers can accurately predict their monthly costs and future expenses, allowing them to budget accordingly. Additionally, these loans are offered for up to 3-year periods during the construction phase of a project, which can provide borrowers with more flexibility in terms of repayment.

These loans are only offered by two HUD multifamily loan programs, the HUD 221(d)(4) program, and the HUD 232 program.

The drawbacks of an interest-only fixed-rate loan include the fact that when the amortization period of the loan begins, the loan payments get significantly larger than if it had been amortizing from the start. If a borrower isn't ready to handle these payments, they could default on the loan. Additionally, 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: https://hud223a7.loan/glossary/what-is-an-interest-only-fixed-rate-loan and www.commercialrealestate.loans/commercial-real-estate-glossary/interest-only-loans

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 program. For the HUD 221(d)(4) program, you must be a for-profit or non-profit entity, and the project must be a new construction or substantial rehabilitation of a multifamily property. For the HUD 232 program, you must be a for-profit or non-profit entity, and the project must be a new construction or substantial rehabilitation of a healthcare facility. You can find more information about the eligibility requirements for each program on their respective websites:

• HUD 221(d)(4)
• HUD 232

The repayment terms for an interest-only fixed-rate loan depend on the loan program. According to HUD 223a7, interest-only fixed-rate loans are 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.

According to HUD 232, HUD 232 loans for construction and substantial rehabilitation are interest-only fixed-rate loans during the specified construction period. After the construction period, the loan must be repaid in full or refinanced.