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Interest Only Mortgage Calculator

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Interest Only Mortgage Calculator excel to calculate your monthly interest only mortgage payments with a printable interest only amortization schedule by monthly or yearly. The interest only loan calculator calculates initial interest only payments as well as monthly payments after the interest only period is over.

Interest Only Loan Calculator

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Interest Only Loan Calculator Excel

The interest only loan calculator excel with amortization will calculate the monthly payment based on mortgage amount, loan terms, interest rate, and the starting payment date. The interest only calculator will show a printable interest only loan amortization that is downloadable as a PDF. If you need to plug in more information such as the PMI, tax insurance, or any other data, please use the Mortgage Calculator With PMI and extra payment.


Mortgage Calculator for Interest Only Loan

The rate for interest rate only loans can change from month to month or it can be fixed for 10 years. The borrower only pays interest on the loan for a term that generally lasts for 5 to 7 years. At the end of the term, the borrower can either start paying principal on the mortgage or pay off the mortgage by making a lump sum payment or they can choose to refinance their home. This mortgage calculator for interest only loans calculates the initial interest only mortgage payments and monthly mortgage payments including principal after the interest only period term.


What are interest only mortgages?

An interest only mortgage is a mortgage that gives a borrower the option to make only interest payments for a certain period before the regular payments start to kick in. The interest only period could be anywhere from 5 to 10 years on a 30-year term. When the initial interest only period ends, the interest rate for the loan becomes adjustable which means the interest rate varies each year. On a conventional mortgage, the monthly payments consist of two parts, the interest, and the principal. Since an interest only mortgage allows a borrower to pay only the interest for the first several years, the monthly payment is smaller than a conventional mortgage. This type of interest only loan is attractive to those who can't afford large monthly payments, but borrowers end up paying much more for the life of the loan. When the interest only period ended, many borrowers got into trouble because the monthly payments increased as they now are required to pay the principal on top of the interest payment, and their interest rate could go up since it is adjustable after the initial interest only period is over.


Pros and cons of an interest only mortgage?

Following is a list of the pros and cons of an interest only mortgage. Pros

  • Lower Monthly Payment - The monthly payments are lower in the interest only period since the borrower is only required to make interest payments.

  • Afford To Buy a House - Interest only mortgage helps some borrowers buy a house that they couldn't afford otherwise.

  • Lower Rates Initially - The initial rate for interest only mortgage are generally lower than a fixed-rate mortgage since they are adjustable after the interest only period ended.

  • More Cash Flow - Since borrowers are only required to make interest payments each month, they will have more cash in their pockets for other use.
Cons
  • No Equity in Your Home - Since you are not making principal payment, you are not building equity in your home.

  • Increase Monthly Payment - After the interest only period, your monthly payments will be much larger since you are now required to make principal payments in addition to the interest payments.

  • Interest Rate Going Up - Since the interest rate will become adjustable after the interest only period, it could go up substantially, and a borrower might not be able to repay the loan.

  • Balloon Payment - Some interest only loan requires a big lump sum payment or balloon payment at the end of the loan term.


Interest only mortgage requirements

The requirement for an interest only mortgage is generally stricter than conventional mortgages because they are riskier for lenders. The lender may require the borrower to have a higher credit score, a bigger down payment, and lower debt to income ratio. The banks want to make certain that they can get their money back plus interest.


Should I get an interest only mortgage?

We do not recommend interest only mortgages for most people as they are way riskier than a fixed-interest loan. Some people use interest-only mortgages for investment purposes, to buy houses that they otherwise couldn't afford, expecting the housing market to go up. While houses do appreciate over time, recessions happen. During the housing bubble of 2008, many people lost their homes because they couldn't afford mortgage payments. Think twice if you are really thinking of getting an interest only mortgage, use our interest only mortgage calculator to calculate the costs and the monthly payments. Please note, our interest only loan calculator does not take into account the adjustable rate.

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