Interest Only Loans
Calculate interest only
mortgage payments by inserting the appropriate loan variables in the
calculator below.
The monthly savings on interest only loans can be significant and most
lenders offer consumers the ability to pay over this amount (typically
up to 20% extra per year - varies by lender) without a penalty.
Interest Only Loans
An "Interest Only"
Mortgage loan is a very popular alternative to traditional fixed rates.
Gaining popularity at record speed these home loans allow the consumer
to pay "interest only" during a defined period of time for the loan.
For example, one of the most common programs a is a 5 year interest only
loan where the borrower has a fixed rate for five years and is only
obligated to pay the interest owed every month. This could mean
hundreds of dollars in monthly cash flow savings, increased purchasing
power (since you qualify on the interest only payment) and more. These
loans are not for everybody however if you are self disciplined, have a
good understanding of the time frame you will be in your home and
understand the potential risks then these products provide an extremely
attractive option to many homeowners.
POPULAR INTEREST ONLY PROGRAMS
Libor
loans are loans based on either a fixed or adjustable rate tied to the
libor index. LIBOR is an abbreviation for "London Interbank
Offered Rate," and is the interest rate offered by a specific group of
London banks for U.S. dollar deposits of a stated maturity. Choosing a
LIBOR index based mortgage loan and paying "interest only" allows the
homeowner a number of benefits over fixed rates (see right). Some of
the most common Libor mortgage loan programs available are:
One Month
Libor Loan
The
interest rate on this loan is the sum of the LIBOR index plus a margin
rounded to the nearest one-eighth of one percentage point, (0.125%). The
margin will not change throughout the term of the loan however the index
value will be adjusted every month, which will cause your interest rate
to be adjusted accordingly.
Six Month
Libor Loan
The
interest rate on this loan is the sum of the LIBOR index plus a margin
rounded to the nearest one-eighth of one percentage point, (0.125%). The
margin will not change throughout the term of the loan however the index
value will be adjusted every six months, which will cause your interest
rate to be adjusted accordingly.
One
Year Libor Loan
The
interest rate on this loan is the sum of the LIBOR index plus a margin
rounded to the nearest one-eighth of one percentage point, (0.125%). The
margin will not change throughout the term of the loan however the index
value will be adjusted on an annual basis which will cause your interest
rate to be adjusted accordingly.
3 Year
Libor ARM
The
interest rate is fixed for the first three years of the loan term and
your only obligation are interest only payments. during years 4 thru 30
the interest rate is adjusted every year to the sum of the LIBOR index
plus a pre-defined margin rounded to the nearest one-eighth of one
percentage point - (0.125%). The margin will not change throughout the
term of the loan however after the initial period has passed (month 37)
the unpaid balance is fully amortized over the remaining term and the
borrower is now obligated to make principal and interest payments to the
lender.
5 Year Libor
ARM
The
interest rate is fixed for the first five years of the loan term and
your only obligation are interest only payments. during years 6 thru 30
the interest rate is adjusted every year to the sum of the LIBOR index
plus a pre-defined margin rounded to the nearest one-eighth of one
percentage point - (0.125%). The margin will not change throughout the
term of the loan however after the initial period has passed (month 61)
the unpaid balance is fully amortized over the remaining term and the
borrower is now obligated to make principal and interest payments to the
lender.
7 Year Libor
ARM
The
interest rate is fixed for the first seven years of the loan term and
your only obligation are interest only payments. during years 8 thru 30
the interest rate is adjusted every year to the sum of the LIBOR index
plus a pre-defined margin rounded to the nearest one-eighth of one
percentage point - (0.125%). The margin will not change throughout the
term of the loan however after the initial period has passed (month 85)
the unpaid balance is fully amortized over the remaining term and the
borrower is now obligated to make principal and interest payments to the
lender.
10 Year
Libor ARM
The
interest rate is fixed for the first ten years of the loan term and your
only obligation are interest only payments. during years 11 thru 30 the
interest rate is adjusted every year to the sum of the LIBOR index plus
a pre-defined margin rounded to the nearest one-eighth of one percentage
point - (0.125%). The margin will not change throughout the term of the
loan however after the initial period has passed (month 121) the unpaid
balance is fully amortized over the remaining term and the borrower is
now obligated to make principal and interest payments to the lender.
30 Year
Fixed Rates (10 Years Interest Only)
A fixed
rate for 30 years where the first 10 years are interest only payments.
After the initial period has passed (121st month) the unpaid balance is
fully amortized over the remaining term of the loan however the interest
does not change. Most lenders allow the borrower to make voluntary
principal payments during the interest only period.
30 Year
Fixed Rates (15 Years Interest Only)
A fixed
rate for 30 years where the first 15 years are interest only payments.
After the initial period has passed (121st month) the unpaid balance is
fully amortized over the remaining term of the loan however the interest
does not change. Most lenders allow the borrower to make voluntary
principal payments during the interest only period
