The Importance of an Interest Only Mortgage Calculator

2007-03-08 10:33:40

( Financial )



With an interest only mortgage, you are given an opportunity to use your money for income earning investments that could offset the interest that you pay for your mortgage. An interest only mortgage may be a plum deal indeed if you know how best to use it. To this end, you will find that an interest only mortgage calculator will be a great aid in your financial planning.

Financial institutions offer interest only mortgage rates so that people who have a penchant for investments will save on monthly payments for a period of time. In an interest only mortgage setup, you are going to be given a fixed number of years (the industry standard is five years) during which time you are going to be paying only the interest on your mortgage. You are not required to make payments toward the principal so your monthly payments are considerably lower.

The difference between the payments that you would have been making if you had a fully amortizing mortgage as opposed to an interest only mortgage could then be used to invest in a high yield savings account, a retirement plan, or an educational plan for your children.

But a short term outlook can only harm you. Fixed rate interest only mortgage terms are not forever. Interest only mortgage rates will become fully amortizing after a set period of time and you can expect your monthly payments to jump significantly.

With an interest only mortgage calculator you will know exactly how much you are expected to pay every month when you are making only interest payments. An interest only mortgage calculator will also tell you how much you are expected to pay when the interest only payment period has passed.

And when you know the exact jump from your initial monthly payments to your expected monthly payments, then you can make a more informed decision on whether an interest only mortgage loan is right for you. If the money you save cannot bring you income that would offset the rise in interest rates when the grace period is over, then taking out an interest only mortgage loan may not be the right move for you. Likewise, if you think that your earning potential at the time the loan becomes fully amortizing is not enough for you to make payments, then you had better steer clear of interest only mortgage loans.

Always remember that taking out a loan is a serious matter. Before you take out an interest only mortgage loan, be sure to use an interest only mortgage calculator.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.