Interest Only Mortgage Calculator

What is an Interest Only Mortgage Calculator?

An Interest Only Mortgage Calculator is a financial tool that helps borrowers estimate their monthly interest payments and total interest costs when repaying an interest-only mortgage. This calculator can help you understand how much you will pay in interest each month and over the life of the loan.

Formula for Interest Only Mortgage Calculation

The formula for calculating the monthly interest payment on an interest-only mortgage is:

\[M = P \times r\]

Where:

• M = Monthly Payment
• P = Principal Loan Amount
• r = Monthly Interest Rate (Annual Rate / 12)

Calculation Steps

1. Calculate the monthly interest rate by dividing the annual rate by 12.
2. Apply the formula to calculate the monthly interest payment.
3. Calculate the total interest paid by multiplying the monthly payment by the number of payments.

Example

Let's consider a scenario with the following details:

• Loan Amount: $50,000
• Interest Rate: 5% per year
• Repayment Term: 10 years

Calculation:

1. Monthly interest rate: 5% / 12 = 0.4167%
2. Monthly payment: $208.33
3. Total interest paid: $25,000

In this example, the borrower would pay $208.33 monthly. Over the 10-year term, they would pay a total of $25,000 in interest. This calculation helps borrowers understand the true cost of their interest-only mortgage and plan for repayment.