Interest Only Mortgage Calculators
From LoveToKnow Mortgage
Interest only mortgage calculators are valuable tools that can help you decide whether that perfect house is for you, or you if can afford a little more or a little less. They can also help you decide on what type of mortgage works best for your budget.
Basics of Interest Only Loans
For most mortgages, you make a prearranged payment that covers interest and a small amount of the principal. An interest only loan, on the other hand, is exactly what it sounds like. You pay the interest only on a loan for a pre-arranged amount of time. You do not pay any principal unless you wish to. It is recommended that you try to pay down the principal if you have extra money at the end of the month. With interest only loans your mortgage payment is less than it would be if you were paying interest and principal, and interest only mortgage calculators can help you calculate the difference.
Advantages of Interest Only Loans
Only paying the interest of a loan can be seen as an advantage in many markets where decent homes are out of the price range of many middle-class Americans. These loans are also an advantage if you expect your home’s value to go up quickly or if you expect to get a large increase in your salary quickly.
Disadvantages of Interest Only Loans
However, interest only loans also have many disadvantages. With an interest only loan, you are not paying down your principal, a huge problem if you plan to sell your house within a few years. You could end up paying thousands of dollars in interest and selling your house for what you owe on it. In addition, with home markets fluctuating in many parts of the country, people may find their homes have gone down in value, which is a disaster if you have an interest only loan.
Additionally, most of these loans will only allow interest only payments for 3, 5 or 7 years. After that, you will be expected to start paying the interest and principal.
Your interest rate may also be adjustable and you could end up paying more in interest over time, without whittling away at your principal.
Interest only loans are not recommended by financial advisors for First Home Mortgages or buyers who are stretching to get their dream homes due to the risk of foreclosure.
Interest Only Mortgage Calculators
An interest only mortgage calculator is an online tool that will allow you to calculate what your mortgage will be. To use the calculator, you will need to enter different figures, including:
- Loan Amount
- Loan Term in years
- Expected Interest Rate
Many interest only mortgage calculators will allow you to see what your mortgage payment would be if you were paying principal and what your payment would be if you were paying interest only. Some of them will even calculate your monthly savings.
It is recommended that you play with the numbers a little bit while working with an interest only mortgage calculator. By having a great initial down payment or changing the number of years you expect to have the loan, you can decrease your loan amount. See how low your payments can actually get, but be realistic. If you don’t have or can't get $50,000 as a down payment for your home, you shouldn’t factor this amount into your loan amount.
Websites with Interest Only Mortgage Calculators
This page has been accessed 973 times. This page was last modified 04:21, 21 April 2006.
© 2006-2008 LoveToKnow Corp.
