How Can I Use An Interest Only Mortgage Calculator?

interest only mortgage loan calculator

Mortgage Loans

A typical mortgage involves paying both the principal and interest each month. Over time the mortgage is slowly paid off. Many mortgages are for thirty year terms.

An interest-only mortgage offers a borrower the chance to make a lower payment.

The borrower pays only the interest due on a mortgage. No principal is being paid. As such the borrower pays a lower regular payment. The principal on the loan is not paid off, so the loan size is the same.

If you commence with a $400,000 mortgage and make interest-only payments on it for five years you’ll finish up with a $400,000 mortgage at the end of those five years.

Standard Payment

The regular payment can be worked out with a free interest only mortgage calculator. These are available online, or you can do it by yourself.

The interest-only payment is the principal of the loan multiplied by the interest rate. You divide this result by twelve to get the regular payment.

For example, a $100,000 mortgage with a 12% interest rate will have an annual $12,000 interest payment. The monthly payment will be $1,000 ( 1/12 of the yearly IR payment ).

An online interest only mortgage calculator can help you compare this payment with a regular mortgage payment. You can see what the monthly savings can be, and your annual savings. Your annual savings with this payment type can be many thousands dollars or more depending on your loan size and rates.