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Interest Only Mortgage Formula:
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An interest only mortgage is a type of home loan where you only pay the interest on the borrowed amount each month, without reducing the principal balance. The full loan amount remains payable at the end of the mortgage term.
The calculator uses the interest only mortgage formula:
Where:
Explanation: This calculation determines the monthly interest payment only, which does not reduce the original loan balance of £60,000.
Details: With an interest only mortgage from Nationwide, your monthly payments cover only the interest charges. You'll need a separate repayment strategy to pay off the £60,000 principal at the end of the mortgage term.
Tips: Enter the annual interest rate offered by Nationwide as a percentage (e.g., enter "3.5" for 3.5%). The calculator will show your estimated monthly interest payment.
Q1: What happens at the end of an interest only mortgage term?
A: You must repay the full £60,000 principal amount. This is typically done through an investment plan, sale of the property, or other repayment strategy.
Q2: Are interest only mortgages still available from Nationwide?
A: Nationwide may offer interest only mortgages to eligible borrowers who meet specific criteria and have a credible repayment strategy.
Q3: What are the advantages of an interest only mortgage?
A: Lower monthly payments initially, potential tax benefits for landlords, and flexibility to invest the difference elsewhere.
Q4: What are the risks of an interest only mortgage?
A: The principal debt doesn't reduce, requiring a repayment plan at term end. If investments underperform or property values fall, you may struggle to repay the £60,000.
Q5: How does Nationwide assess eligibility for interest only mortgages?
A: Nationwide typically requires a minimum income, equity percentage, and evidence of a credible repayment strategy for the £60,000 principal.