Basics
An interest only payment is one where a a borrower pays only the interest due on a loan.
Mortgage
No payment is made to pay off the valuable of the loan. The interest only payment is lower than a quarterly loan. When only an interest payment is made the loan balance remains the same.
When you purchase a asset you build equity on it in two ways:
- rise in asset value
- paying the loan off
One the other side is the shop value of your property. You do not control this end.
If the asset value has increased by 10% in one year, and you have a quarterly 30 year loan on the asset nearly all of your increase in equity has come from the rise in the property. Very wee of the equity has been made by paying your mortgage down slightly.
For this conjecture many real estate buyers and investors pick to have interest only mortgages.
Figuring Out An Interest Only Payment
Your interest only payment is easy to form out.
Multiply your loan number by the each year interest rate. This is your total each year interest payment. Divide this number by twelve to get your monthly payment.
For example, a 0,000 loan with a 10% interest only payment has:
- an each year interest charge of ,000
- a monthly interest charge of ,000
There are many free mortgage calculators ready online to help you form this out.
How Do I frame Out An Interest Only Mortgage Payment?
