from blog

Using A Loan Calculator!

Requesting a loan, for anything, can be an intimidating process and when it is for a mortgage the intimidation rate seems to go up a notch. This is a time when an interest only loan calculator can be a great tool to have as it provides a great deal of flexibility during the early years of the mortgage. It can help you calculate exactly what you will be paying and saving over the term of the loan before you sign any contracts.

A borrower can choose to repay some of the loan balance, or interest only, if they so desire. Using an interest only loan calculator can help you decide how much and for how long to do this. As after you have been paying interest only payments for a number of years the amount that you borrowed will have to be repaid over a much shorter period of time, which in turn results in a rather notable increase in your payments.

In order for an interest only loan calculator to work you must input certain information, including the mortgage amount, which is the expected balance of your mortgage and the term (the total number of years that you will be making payments on the mortgage) of the loan. Keep in mind that the calculator will automatically assume that after your interest only period of time expires your monthly payment increases, making your remaining balance amortized over the rest of the loan term. Using the figures given by the interest only loan calculator this will result in your entire mortgage being paid in full at the end of the term.

You will then enter the number of years that you wish to pay the interest only on the mortgage, again, keep in mind that at the end of this period the payment will increase in order for the remaining balance to be paid off by the end of the loan. Next, you will enter the interest rate into the interest only loan calculator and at this point you can have your basic payment amount. For example, if you have a $200,000.00 mortgage for 30 years at an interest rate of 5.250% and you want 5 years of interest only payments your monthly payments would be $875.00. When calculated the total amount of your payments would be $412,047.27 with the total interest being $212,047.27.

When using an interest only loan calculator you can include any type of prepayments that you may want to include. These prepayment type options normally include none, monthly, yearly and a one time payment. You also enter in the amount that you want to prepay and that amount gets applied to your mortgage’s principal balance, depending upon the type of prepayment you chose. You will include your “start with” payment (the payment number, such as 1st, that you want to begin prepayment with) and the interest only loan calculator will automatically figure the total amount of your savings.

Comments are closed.