Why Use The Interest Only Mortgage Calculator?
This Interest Only Mortgage Calculator will show you what your payments will be during the two phases of an interest-only mortgage; Interest Only and Interest + Amortization (the term used to describe paying off debt over a period of time). This is based on the amount you borrow, the length of the term, interest rate and length of interest-free period.
You can also use the calculator to determine your interest savings from making additional ‘prepayments’ to reduce the mortgage principal (amount owed not including interest). The calculator can also show how those payments will affect the amortization schedule, the monthly payments required during the amortization phase, and the total interest payments over the full term of the mortgage.
For example, you could save nearly $18,000 in interest throughout the term of your mortgage by paying an extra $150 per month after the first year ($150k mortgage repaid over 25 years at 4% with 7 years Interest-Only period). It’s a very good idea to consider, if you find yourself in a financial position that enables you to take advantage of it.
How to Use the Interest Only Mortgage Calculator
Not sure where to start? Let us help you:
- Use the slider to set your intended mortgage amount, or just type it into the box
- From the drop-down list, select the number of years you believe you will need to pay off your mortgage
- Choose the number of years that will make up the Interest Only phase of the mortgage repayment plan, and the Interest rate
- Click Prepayments to input any additional payments you plan to make during the Interest Only phase.
When you click Calculate, you will see what your monthly payments will be during the initial, interest-only phase of the loan. Then, click View Report to see how your repayment plan will look throughout the duration of your mortgage. This will include the projected increase during the amortization phase of the mortgage, as you begin paying down the loan principal.
Who is this Calculator for?
This calculator is most useful if you:
- Are looking to get onto the property ladder, but can’t yet afford the monthly costs of a standard mortgage
- Want to plan ahead by knowing how much your loan will cost at each stage of repayment
- If you want to compare the effect of prepayments on the amount of interest you will pay throughout your term
Why is the total interest higher than that of a standard mortgage?
The total interest payable is high on Interest-Only Mortgages because during the first phase of the plan, the debt never actually decreases. And if the debt doesn’t increase, neither can the amount of interest payable each month. 4% of $120,000 will be the same in the first year of the term as it will be in the fifth year.
Paying only the interest on a monthly basis is useful for some, but the trade-off is a higher total cost for the property. Making prepayments can help to mitigate this however, by allowing you to pay off small chunks during the Interest Only phase - as and when you can afford to.
I have my answer – what should I do next?
Whether the projected payment is more or less than you expected, the recommended next step is to Get a FREE Quote. Answer a few simple questions and we will take care of the rest so the mortgage providers come to you, instead of you having to look for them. It could not be any easier!