How to calculate an Interest Only mortgage payment?


If you are taking an Interest-Only mortgage, or a Pick-a-Pay with Interest-Only payment option you may need to know how to calculate an interest only mortgage payment.

Basically, you are advised to use a web calculator for interest only mortgage payments. And, your lender is supposed to provide you with a spreadsheet with your interest only mortgage payment and how it is going to change over the years, and after loan recalculation.

Calculating Interest Only Payment

You need the loan amount, interest rate and term to calculate the interest only payment for a mortgage using interest only mortgage calculator. For example, if you borrow $200,000 at 7% for 30 years your interest only payment will be around $1208. The fully amortizing payment is $1364.

A pure interest only mortgage will usually allow interest only payments for 5 or 10 years and there may not be any negative amortization. However, with Option ARMs it is very possible that negative amortization will occur, the loan will be recast and a fully amortizing payment will be required.

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