Interest-Only Mortgage Calculator

This tool helps buyers calculate current interest-only payments, but most interest-only loans are adjustable rate mortgages (ARMs). When the housing market is hot many people chase it, buying near the peak with interest-only loans. If home prices continue to climb, one can refinance at a lower rate. However if rates reset higher, so too will payments — causing home prices to decline & many marginal buyers to lose their equity & perhaps their homes. We also offer an I-O ARM calculator and a traditional ARM loan calculator.

Input Information
Loan Information
Loan Amount : ($)
Interest-Only Rate : See Today's Best Rates (%)
Conventional Loan Rate : (%)
Loan Term : (Yrs)
 Let Me Print That Form in PDF!

Your Email Address :
Convenient, helpful options:
  • view results online by clicking calculate,
  • save results as a PDF by clicking let me print that, or
  • send results to your email address
No personal details are required to see the online results & emails are only used to send the requested reports.


Money Saving Tip: Lock-in Ashburn's Low 30-Year Mortgage Rates Today

How much money could you save? Compare lenders serving Ashburn to find the best loan to fit your needs & lock in low rates today!

By default 30-yr ARM loans which reset after the fifth year are displayed in the table below. Filters enable you to change the loan amount, duration, or loan type. If no results are shown or you would like to compare the rates against other introductory periods you can use the products menu to select rates on loans that reset after 1, 3, 5, 7 or 10 years. By default purchase loans are displayed. Clicking on the refinance button displays current refi rates. Additional loan options are listed in the drop down filter area.


Paying an Interest-Only Mortgage

A 30-year, fixed-rate mortgage is the traditional loan choice for most homebuyers. However, the loan is inflexible, and it may not offer every buyer the options they need to meet their financial goals. For example, some home buyers may not have the down payment or other financial credentials they need to get the 30-year mortgage for the home they want to buy. Other home buyers may want to free up cash to invest in other opportunities while still taking advantage of a hot real estate market. In these and other instance, an interest-only mortgage may be the right option.

There are Some Advantages

The attraction of an interest-only loan is that it significantly lowers your monthly mortgage payment. Using our above estimator, on a $250,000 house with a 4.75 percent interest-only rate, you can expect to pay $989.58, compared to $1,342.05 for a conventional 30-year, fixed-rate loan at 5 percent interest.

Investors often choose an interest-only loan as a way to keep their expenses low while they renovate or market a home for resale. The strategy is a smart one in a hot housing market where prices are appreciating fast and investors can plan to make a fast resale for a profit.

Those interested in investing may also choose an interest-only loan so they can put their money toward higher-yield investments.

Homeowners who can’t quite afford the home of their dreams but who expect to increase their earnings potential in a few years’ time may also find an interest-only loan to be the solution they need. For example, if a couple expects one partner to return to the workforce after caring for children or to receive a big promotion, they can get an interest-only loan at the start of their mortgage, then transition to a traditional loan when their financial situation improves. They can then purchase the home of their dreams without having to wait for their financial situation to adjust.

Risks of an Interest-Only Loan

Debt.There are many risks associated with interest-only home loans, so it is important to carefully consider all the options before choosing one.

Because you are only paying interest, you are not repaying principal to build equity. If you are trying to sell your home before the loan comes to term, you are betting on the value of your home appreciating in a very short time. If you lose that bet, you could end up owing a lot more money – or losing money in a sale. To minimize that risk and build equity one can periodically make extra payments.

Interest-only loans typically last for a term of five or 10 years. Within that time, the interest rate may adjust as often as monthly. If that’s the case, you could end up paying much more than you bargained for when you took out the loan. At the end of the loan, you have to either get another interest-only loan, or you have to get a conventional loan. Since you have built no equity up to that point, you can expect to have a significantly increased payment as you try to catch up on the principle.

In some cases, you may get negative amortization with an interest-only loan. That means that you aren’t even paying the full interest on the loan, so when the loan comes to term, you will have a higher balance than when you started paying it.

Calculating the Risk

By understanding all the risks and benefits associated with interest-only loans, you are in a good position to make the right decision for your family. You can use the above calculator to help you determine what kind of payments you can expect with an interest-only loan compared with a traditional mortgage, then use that information for educated financial planning.

You can use this tool to compare interest only mortgages to fully amortizing adjustable rate and fixed-rate mortgages.



Ashburn Homeowners May Want to Refinance While Rates Are Low

US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.

Are you paying too much for your mortgage?

Find Out What You Qualify For

Check your refinance options with a trusted Ashburn lender.

Answer a few questions below and connect with a lender who can help you refinance and save today!