Interest-Only Mortgage Calculator
These are freely available online tools used to calculate the payments that go towards the payments of interest-only mortgages. To use these calculators you have to enter the following information:
- Total amount of the loan
- Interest rate applicable on the loan
- The total length of the mortgage in years
Once this information is entered the calculator will present the Interest-only payment amount and the total number of payments for the interest.
Interest-Only Mortgages are special types of loans known as Adjustable Rate Mortgage (ARM). What makes these types of loans differ from conventional mortgages is that they can be structured in different ways in terms of the repayment process while conventional mortgages or Fixed Rate Mortgages (FRM) have a fixed schedule for the repayment that cannot be changed, except by refinancing the mortgage.
In Interest-Only Mortgages, as the name implies, the borrower pays only the interest for a certain period of time (usually from 5 – 10 years) and after this point, the mortgages switches to the format of conventional mortgages, where they will be paying the interest and the principal amount. It is also possible in some cases that once the interest-only period is complete, the borrower has to make a lump sum payment towards the principal amount.
These types of mortgages are very popular among first time home buyers since they provide a more straight forward process towards mortgage repayments. Because during the mortgage-only period the repayments are low, this allows first-time homebuyers to save more money which can put to use in other areas.