Stop paying principal.

THE LEVER

Interest only. IO. This is the boogeyman in residential, the third rail. It evokes images of 2008, The Big Short, and Margin Call.

But it's 2026. Time to look again. Modern interest only lives inside DSCR programs, funded by the same private credit demand I keep pointing to in Radar. Very stable money, very real product, and the structure fixed the old problem. A typical product today runs a ten year interest only period, then converts to fully amortizing for the rest of the term. This means that you get the flexibility of interest only, but your properties are still paid off after 30 years.

Here's the part that has me excited. Interest only used to be reserved for large commercial projects. Mom and pop residential investors simply didn't have access. Now you do, and it's a portfolio tool. If you hold ten or twenty doors and want more monthly cashflow, the old playbook was buy down the rate or pay off principal. Now there's a third lever: go interest only on a few of your skinniest performers and let them carry the portfolio's cashflow. GREAT product, when used to balance a portfolio.

Same five rentals. Real client portfolio, numbers rounded, name withheld. 10-year IO period, then fully amortizing. Not a quote.

And the best part: pay down principal on an IO loan and your payment drops the very next month. It works like a recast you can trigger whenever you want, no fee, no application, no headaches.

So this week: Look at your portfolio, and identify a cashflow number you would like to hit. See if interest only notes can help get you there. That delta is capital you can redeploy.

THE W

THE L

Personal one this week. I had a servicer sell one of my mortgages, and it marked the account as closed on my credit report. I noticed my score dropped 20 points BEFORE I had been notified of the sale. To fix it, I will have to dispute it, in writing, with records that have to be pulled from both the selling servicer, and the purchasing servicer. I UNDERSTAND why you guys get so frustrated with servicers, believe me!

ON THE RADAR

• ARMs from the 2023 rate peak are coming due. People refi'd into them when 30-year money was pushing 8%, and those resets are hitting now. I have a stack of these refis on my desk.
• Agents and LOs I talk to are very interested in AI for the admin and clutter, not the client work. I am curious to see if that trend holds: AI making more time for the human to be client facing.
• Compared notes with a very plugged-in client who runs a portfolio of STRs. We are seeing the same thing: the middle of the STR market is getting squeezed. More on that later.

Cheers,
Wyatt

The Leverage Letter | When you know the game, nobody can play you.

Numbers reflect a real client portfolio, anonymized and rounded; not a quote or a commitment to lend. All loans subject to credit approval and underwriting. Next in the archive: the 2026 BRRRR math nobody runs.