You can use this interest only mortgage calculator to figure out your monthly payments if you decided to take out an interest only loan. With an interest only mortgage you only pay interest charges and the principal, or balance, of the loan is never reduced. This keeps your monthly payments low, but increases the total interest charges over the life of the mortgage.
Calculator Definitions
The variables used in our online calculator are defined in detail below, including how to interpret the results.
The total amount of money borrowed for this mortgage, also referred to as the principal on the loan.
Annual Interest Rate (%)
This is the annual interest rate on the mortgage. This is not the APR, which takes into account other costs associated with the mortgage.
Term of the Loan (Years)
The term of the loan is the number of years over which the mortgage will be paid. The most common mortgage terms are 15, 20 and 30 years. With an interest only mortgage, you will need to refinance the loan at the end of its term since the principal, or balance, is never reduced.
Standard Monthly Payment ($ / Month)
This is the monthly payment necessary to repay the loan over its lifetime if you were to choose a conventional, or more "standard," mortgage.
Interest Only Mortgage Payment ($ / Month)
This is the monthly mortgage payment that is necessary for an interest only loan. With this type of loan, the principal balance never declines and is payable at the end of the loan's term.
Monthly Savings ($ / Month)
This is how much money you can save on you monthly payment by taking out an interest only mortgage.
Total Savings on Monthly Payments ($)
This is how much you can save on your monthly payments over the term of the mortgage by making interest only payments. Keep in mind that since the principal balance never declines, that the total loan balance would also be payable at the end of this mortgage's term.
So on the one hand, interest only mortgages allow you to save money on your monthly payments, however, your total interest charges will be higher than a standard loan because the mortgage's principal never declines.
Interest Paid with Each Loan ($)
The interest paid with each loan type illustrates the downside of an interest only mortgage. Since the principal balance never declines, you are effectively borrowing more money over a longer period of time and therefore the interest charges, or cost of the mortgage, will be higher.
Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.
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