Use the table below to compare interest rates aprs fees and monthly payments for three five and seven year interest only loans.
1 year interest only mortgage.
Investors often choose an interest only loan as a way to keep their expenses low while they renovate or market a home for resale.
We ll compare that to a traditional mortgage in which you make monthly payments of principal and interest for the entire loan term.
An interest only mortgage is a loan with monthly payments only on the interest of the amount borrowed for an initial term at a fixed interest rate.
For a basic type of mortgage use this simple mortgage calculator or mortgage calculator with taxes and insurance.
The above annual percentage rates apr for our special offers are compounded semi annually not in advance.
Like a more traditional 30 year mortgage.
To illustrate how an interest only home loan works let s say you take out a 200 000 30 year fixed rate mortgage with five years of interest only payments at 5.
The actual appraisal fee may vary.
Using our above estimator on a 250 000 house with a 4 75 percent interest only rate you can expect to pay 989 58 compared to 1 342 05 for a conventional 30 year fixed rate loan at 5 percent interest.
The mortgage must be advanced within 120 days from the date of application.
Lenders say the 7 1 and 10 1 choices are most popular with borrowers.
Lenders calculate how much someone can borrow based in part on how their monthly income compares to their monthly debt payments including the potential mortgage payment this is called a debt to income ratio with lower required payments on an interest only loan the amount that can be borrowed increases significantly.
These mortgages are also called interest only arms or io arms for short.
Total years including the interest only period interest rate the annual nominal interest rate or stated rate on the loan interest only for the period of time that the mortgage will be interest only.
Although new interest only mortgage lending is far lower than in the past there are still plenty of homeowners who took one of these products before 2008.
Buy a more expensive property.
You ll usually see interest only loans structured as 3 1 5 1 7 1 or 10 1 adjustable rate mortgages arms.
Each apr calculation is based on a mortgage of 100 000 with a 25 year amortization and a 300 appraisal fee.