Interest only mortgage calculator
When investing in real estate, one of the most popular financing options is the interest-only mortgage. This type of loan allows you to pay only the interest on the loan for a certain period of time, usually 5 to 10 years. During this interest-only period, the principal balance doesn’t change and your monthly payments are lower than traditional mortgages.
Our Interest Only Mortgage Calculator is a must-have tool for investors to determine the feasibility and financial impact of an interest-only loan. Simply enter the loan amount, interest rate and loan term and you can calculate your monthly interest payments and see how this financing option fits into your investment strategy.
Why Interest-Only Mortgage?
- Cash Flow Management: Lower monthly payments gives you more cash to invest elsewhere or use to improve the property.
- Flexibility: For investors who expect higher income in the future or plan to sell the property before the interest only period ends.
- Investment Growth: Potentially maximize returns if the property value grows over time.
How the Interest Only Mortgage Calculator Works
- Loan Amount: Enter the total loan amount.
- Interest-Only Period: Enter the number of years.
- Calculate: The calculator will show the monthly interest payment and total interest paid during the interest-only period.
Pros and Cons
Pros:
- Lower Initial Payments: Lower payments during the interest-only period gives you more cash flow.
- Investment Opportunities: Extra cash can be used for other investments or property improvements.
- Tax Benefits: Interest payments may be tax deductible (consult a tax professional).
Cons:
- Payment Shock: After the interest-only period, payments can increase significantly as you start paying off the principal.
- Equity Stall: Without principal payments, equity doesn’t grow unless the property value grows.
- Market Risk: Relying on property value growth is risky if the market falls.
Who Should Use This?
- Real Estate Investors: Test investments and financing options.
- Homebuyers: Understand the interest-only mortgage implications.
- Financial Planners: Help clients make informed mortgage decisions.
How to Use
- Get Professional Advice: Use the calculator as a starting point and talk to mortgage brokers for personalized advice.
- Compare Options: Change variables to see how changes in interest rates or loan amounts affect payments.
- Plan Ahead: Consider how you’ll manage higher payments after the interest-only period.