Some loan products defer part of the payment obligation to a later term. Aurora handles these with two native two-term loan types, both configured as a single loan within one financing product:
- Interest Only — the homeowner pays only interest in the first term, then switches to full principal-and-interest mortgage-style payments in the second term.
- No Payment — the homeowner makes no payments at all in the first term (interest accrues and is added to the principal), then makes regular mortgage-style payments in the second term.
In this article we’ll cover:
- Choosing between Interest Only and No Payment
- How to create an Interest Only loan
- How to create a No Payment loan
Choosing between Interest Only and No Payment
Use Interest Only when your lender requires at least interest payments during the deferral period.
Use No Payment when your lender allows complete deferral of all payments, with accrued interest capitalized into the balance at the start of the repayment term.
How to create an Interest Only loan
- Go to Database > Financing products and click Add financing product.
- Enter a name, select a project type, and choose Loan. Click Add.
- Click Add Loan.
- Set Loan type to Interest Only.
Configure the shared fields (Principal, Flat fee, Dealer fee, Incentives apply to dealer fee, Interest is tax deductible), then configure the two terms:
Term 1: Interest only
- Interest rate — Annual rate for the interest-only period.
- Duration — Length of the interest-only period in months.
- Loan can have a prepayment — Toggle on to model an optional prepayment during the interest-only period. Reveals two sub-fields: Amount (the percentage of the loan that will be paid off early, entered as % of financed amount) and Month (the month the prepayment is paid to the lender and the loan is reamortized).
Term 2: Mortgage-style
- Interest rate — Annual rate for the repayment period.
- Duration — Length of the repayment period in months.
- Click Save.
How to create a No Payment loan
- Follow steps 1–3 above, but set Loan type to No Payment.
Configure the shared fields, then configure the two terms:
Term 1: No payment
- Interest rate — Annual rate during the deferral period. Interest accrues but no payment is due.
- Duration — Length of the deferral period in months.
Term 2: Mortgage-style
- Interest rate — Annual rate for the repayment period.
- Duration — Length of the repayment period in months.
Note: Because interest accrues during the No Payment term, the starting balance for Term 2 will be higher than the original loan amount. Aurora calculates this automatically.
- Click Save.