Mortgage Calculator & Info
|
|
|
Interest Only Loans Unlike a conventional 30-year mortgage, interest-only loans don’t require payments toward the principal amount anywhere for the first three to seven years. After that initial grace period, borrowers face much higher monthly payments. In contrast, a conventional 30-year mortgage with a fixed rate amortizes the financing costs over the life of a loan – a formula that generates higher monthly payments than an interest-only loan during the first three to seven years. A conventional 30 –year mortgage for $650,000 with a fixed rate of 5.625 percent would require monthly payments of $3,742. An interest only loan with a fixed rate of 5 percent for the first five years of the mortgage would require monthly payments of $2,708 during the first 60 months. In the first five years of the loan, the borrower with the conventional mortgage would lower the outstanding debt to about $602,000. The borrower with the interest-only mortgage still would owe $650,000. By Associated Press |
