Interest Only Mortgage Calculator
This interest-only mortgage calculator compares side-by-side the monthly payment for an interest-only mortgage to a conventional principal and interest mortgage. You can include taxes, insurance, PMI, and association dues to get a complete picture of the two mortgage payments.
Before you are tempted by the lower cost of an interest-only mortgage make sure you consider the risks. Rates on interest-only loans can change frequently while others are fixed for a 10-year period so read the fine print. Also, beware of balloon payments and/or negative amortization on some loans.
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Compare Interest-Only Mortgages To Conventional Mortgages
Thinking about taking an interest-only mortgage but you’re not sure if it’s right for you?
There are many important points to consider beyond just the payment.
This Interest Only Mortgage Calculator makes it easy to compare both a fixed rate and interest only mortgage side-by-side. Simply enter the mortgage amount, mortgage interest rate, mortgage loan term, and perhaps a few of the optional variables, and you’ll find your monthly principal and interest payment for each mortgage.
You’ll also find some helpful advice below to help you better understand interest only mortgages and how they work so you can make the right decision for your situation. . .
Interest-Only Mortgages Vs. Traditional Mortgages
An interest-only mortgage is a type of loan where the mortgagor is only required to make payments covering the interest, but no principal. The interest-only period for these mortgages typically lasts 5 to 10 years, after which the mortgagor will start paying principal.
Traditional home mortgages have monthly payments that are allocated between the principal and interest creating amortization. Modern interest-only mortgages have no amortization unless you choose to pay more than the required monthly payment thus reducing principal.
Some people prefer interest-only mortgages because it frees up cash that can be diverted to other investments. The danger, however, is you make no progress on paying for your house thus delaying the entire amortization process and increasing the total cost for your home.
This Interest Only Mortgage Calculator will help you calculate how much interest should be paid monthly instead of paying both interest and principal every month. You’ll find that you’ll be paying less to start, but remember you’ll eventually need to pay off the principal as well.
Interest-Only Mortgage Pros And Cons
There are a number of benefits to an interest-only mortgage. Below are a few:
While there are benefits to keep in mind, be aware of a few downsides as well:
Consider these points carefully before signing up for an interest-only mortgage.
Interest-only mortgages can work for you if you properly manage your money. But they require a lot of discipline and focus so that you won’t be tempted to spend your extra income on unnecessary things.
Do your homework, shop around for the lowest rate. Complete the calculations above before making a decision. Seek advice from your financial advisor if there are some areas you are unsure of and find out if an interest-only mortgage is right for you.
Interest Only Mortgage Calculator Terms & Definitions
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