Interest Only Mortgage Calculator
Our Interest Only Mortgage Calculator is a powerful tool designed to help you determine your monthly payments for an interest-only mortgage.
This calculator not only provides the monthly payment for an interest-only loan but also compares it with the standard mortgage payment. It’s essential to understand the differences between these two to make informed decisions about your home financing.
Interest-Only Mortgage Calculator
Interest-Only Mortgage Results
Interest-Only Mortgage Monthly Payment:
| Interest-Only | Standard | |
|---|---|---|
| Monthly Payment | ||
| Total Payment Over Loan Term | ||
| Mortgage Principal Balance After Loan Term |
Difference between the Interest-Only and the Standard Mortgage Payment Amount:
The interest only mortgage formula used in this calculator.
=> M is the interest-only monthly mortgage payment.
=> P is the principal loan amount (the amount borrowed).
=> r is the annual interest rate (expressed as a decimal). For instance, an interest rate of 5% would be r = 0.05.
=> n is the number of times that interest is applied per year. For monthly payments, n = 12.
How to use this home loan interest only Calculator
1. Principal Amount ($):
The principal amount represents the total loan amount that you’re considering to borrow. It does not include any interest. This is the base amount upon which interest will be calculated.
How to Use:
Enter the exact amount you intend to borrow from the lender without including any commas or currency symbols. Ensure accuracy as this forms the base for all subsequent calculations.
Example: Suppose you’re considering a home loan of $250,000.00. In the principal amount field, you would input 250000. This means you’re looking to borrow twenty-five thousand dollars before any interest accrual.
2. Interest Rate (%):
The interest rate is the cost of borrowing the principal loan amount. It can be thought of as the rent on the money you’ve borrowed. This rate is annual, meaning it represents the percentage of the principal amount you’ll pay in interest over a year.
How to Use:
Enter the expected or given annual interest rate in this interest only mortgage calculator as a whole number or decimal, without the percentage sign.
Keep in mind that mortgage rates can vary widely based on various factors, including credit score, down payment, loan type, and current market conditions.
Example: If a lender offers you an annual interest rate of 5% on your home loan, you would simply enter 5 in the interest rate field. This indicates that for every year you hold the loan, you’ll be charged 5% of the principal amount in interest.
3. Term (Years):
The term, in this context, refers to the duration for which you’re considering an interest-only payment structure. During this period, your monthly payments will only cover the interest accrued, and the principal amount will remain unchanged.
How to Use:
Input the number of years you expect to make interest-only payments.
Remember, after this term concludes, you will begin paying off both the principal and the interest, which can result in significantly higher monthly payments.
Example: If you’re considering an interest-only payment structure for the initial 5 years of your mortgage, enter 5 in the term field. This means for the first 5 years, you will only pay interest on the loan, and the principal amount will remain the same.
Once you’ve filled out all the fields, click the “Calculate” button.
By providing the correct information in these fields, this interest only mortgage calculator will be able to give you an accurate representation of your potential monthly payments, helping you make informed decisions.
Displayed result of this Interest Only Mortgage Calculator
The interest only mortgage calculator will then display:
=> Your monthly payment for an interest-only mortgage.
=> A comparison table showing monthly payments, total payments over the loan term, and mortgage principal balance for both interest-only and standard mortgages.
=> The difference between the interest-only and standard mortgage payments over the loan term.
You can also check our standard mortgage loan calculator or see our full collection of finance calculators you can use for free.