Interest-Only Mortgage Calculator

This is the total you'll repay over the mortgage term. It includes the total borrowed plus interest (minus deposit).

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This is the total you'll repay each month. With an interest-only mortgage, you'll repay only the interest throughout the loan term and pay off the principal at the end of the term.

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The Effective Interest Rate (EIR) takes into account the effect of compounding within a year. It provides a true representation of the annual cost of the loan, considering that interest is compounded monthly.

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Interest-only mortgages carry significant risks.

Before committing to one, it is crucial to make sure you can afford it.

For example, if the interest rate increases by 2%, your monthly payment will be:

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Your Monthly Mortgage Payment Breakdown

Your Mortgage Amortization Schedule Monthly Breakdown Yearly Breakdown
Date Monthly Payment Prinicpal Interest Remaining Balance

Frequently Asked Questions

1. What is an interest-only mortgage?

An interest-only mortgage is a type of home loan where the borrower only pays the interest on the loan for a set period, typically 5 to 10 years. After this period, the borrower must start repaying the principal or refinance the mortgage.

2. How does an interest-only mortgage work?

During the interest-only period, the borrower pays only the interest due on the loan each month, resulting in lower monthly payments compared to a traditional mortgage. After the interest-only period ends, the borrower must begin repaying the principal, which will significantly increase the monthly payments.

3. What are the benefits of an interest-only mortgage?

The primary benefit of an interest-only mortgage is the lower monthly payments during the interest-only period. This can be advantageous for borrowers who expect their income to increase in the future, need lower payments temporarily, or have other investment opportunities.

4. What are the risks of an interest-only mortgage?

The main risks include the potential for higher payments once the interest-only period ends, the possibility of not building any equity in the home during the interest-only period, and the risk of the home's value decreasing, which could lead to negative equity.

5. Who should consider an interest-only mortgage?

An interest-only mortgage may be suitable for borrowers who have irregular income streams (such as freelancers or commission-based workers), those who plan to sell the property before the interest-only period ends, or those who expect significant income growth in the future.

6. How do I calculate the monthly payments for an interest-only mortgage?

You can use an interest-only mortgage calculator, like the one provided on this page, by inputting the loan amount, interest rate, and loan term to find out your monthly interest payments.

7. What happens after the interest-only period ends?

After the interest-only period ends, the borrower must begin repaying both the principal and the interest, which will significantly increase the monthly payment. Alternatively, the borrower may choose to refinance the loan or sell the property.

8. Can I make principal payments during the interest-only period?

Yes, most interest-only mortgages allow you to make additional payments towards the principal during the interest-only period. This can help reduce the overall loan amount and lower future monthly payments.

9. How does the interest rate affect my interest-only mortgage?

The interest rate directly affects your monthly payments during the interest-only period. A higher interest rate will result in higher monthly payments, while a lower interest rate will result in lower payments.

10. What should I consider before choosing an interest-only mortgage?

Before choosing an interest-only mortgage, consider your financial situation, future income prospects, the risks involved, and whether you can handle the higher payments after the interest-only period ends. It is also important to compare different mortgage options and consult with a regulated mortgage adviser.

11. How do I use the interest-only mortgage calculator?

To use the calculator, simply enter the property price (or mortgage balance), deposit amount (if any), mortgage term, interest rate, and the start date of the mortgage. The calculator will then provide you with the total mortgage amount, monthly payments, and a detailed breakdown of the payment schedule.

12. What does the monthly payment displayed by the calculator include?

The monthly payment displayed by the calculator includes only the interest payment during the interest-only period. It does not include principal repayment, taxes, insurance, or other potential costs associated with the mortgage.

13. Can the calculator show how my payments will change if the interest rate increases?

Yes, the calculator provides an example of how your monthly payment will change if the interest rate increases by a certain percentage. This helps you understand the potential impact of interest rate fluctuations on your mortgage payments.

14. Is the interest-only mortgage calculator free to use?

Yes, the interest-only mortgage calculator on our website is free to use. You can input your details as many times as needed to explore different scenarios and understand your potential payments.

15. How accurate are the results provided by the calculator?

The results provided by the calculator are estimates based on the information you input. They are designed to give you a good indication of your potential mortgage payments. For exact figures and advice tailored to your specific situation, you should consult with a mortgage adviser or financial professional.


Credits

  1. MoneyHelper