1. What is Interest Only Mortgage Payment?

Interest only mortgage payment is a type of loan payment where you only pay the interest portion of the loan for a specific period, without reducing the principal balance. This results in lower monthly payments during the interest-only period.

2. How Does the Calculator Work?

The calculator uses the interest only mortgage formula:

Where:

• \( P \) — Principal loan amount (₹ or currency)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula calculates the monthly interest payment by converting the annual interest rate to a monthly rate and multiplying it by the principal amount.

3. Importance of Interest Only Payment Calculation

Details: Understanding interest-only payments helps borrowers plan their finances during the initial period of the loan, manage cash flow, and make informed decisions about mortgage options.

4. Using the Calculator

Tips: Enter the principal loan amount in ₹ or your currency, and the annual interest rate as a percentage. All values must be valid (principal > 0, rate > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is an interest-only mortgage?
A: An interest-only mortgage is a loan where you only pay the interest for a set period, after which you start paying both principal and interest.

Q2: What are the advantages of interest-only payments?
A: Lower monthly payments during the interest-only period, which can help with cash flow management and affordability.

Q3: What happens after the interest-only period ends?
A: After the interest-only period, payments increase significantly as you start paying both principal and interest.

Q4: Are interest-only mortgages suitable for everyone?
A: No, they are typically suitable for borrowers with irregular income or those who expect higher future earnings.

Q5: Can I pay extra towards principal during interest-only period?
A: Yes, most lenders allow extra payments towards principal, which can reduce the overall loan cost.