The interest only mortgage calculator helps you figure out what a monthly payment might be on an interest only mortgage loan. An interest only mortgage is a loan payment in which for a set term the borrower pays only the interest on the principal balance, with the principal balance unchanged.
Interest Only Mortgage is a non-amortized mortgage. During the repayment period of an interest-only mortgage, one only pays on the interest that accumulates but not on the principal. Interest only mortgage are becoming increasingly popular as it allows a person to pay a lower monthly payment at the beginning of the loan in order to save money so that a higher monthly payment is more affordable later in the loan.
Example:
Calculate the Interest Only Mortgage Payment for the given loan amount 10000 at 5% interest rate.
Solution:
Convert the interest rate into decimal point by moving the decimal point over to the left two times on the interest
Apply Formula:
(Current loan amount * Interest rate) / 12 = 100000*0.05/12 = 416.66 = 417
Therefore the Interest Only Mortgage Payment for the loan is 417.