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Interest Only Payment Formula:
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Interest only mortgage payment calculates the monthly interest payment for Westpac mortgages where only the interest is paid during the interest-only period, with the principal amount remaining unchanged.
The calculator uses the interest only payment formula:
Where:
Explanation: This formula calculates the monthly interest payment by multiplying the principal amount by the monthly interest rate.
Details: Understanding interest-only payments helps borrowers plan their finances during the interest-only period of their mortgage, providing lower initial payments before transitioning to principal and interest payments.
Tips: Enter the principal amount in AUD and the monthly interest rate as a decimal (e.g., 0.005 for 0.5%). Both values must be positive numbers.
Q1: What is an interest-only mortgage?
A: An interest-only mortgage allows borrowers to pay only the interest for a set period, after which they must start paying both principal and interest.
Q2: How do I convert annual interest rate to monthly?
A: Divide the annual interest rate by 12. For example, 6% annual rate = 0.06/12 = 0.005 monthly rate.
Q3: Are interest-only payments available for all Westpac mortgages?
A: Interest-only periods are typically available for investment loans and some owner-occupier loans, subject to Westpac's lending criteria.
Q4: What happens after the interest-only period ends?
A: After the interest-only period, payments increase as you start paying both principal and interest, which may significantly increase your monthly payments.
Q5: Are there any risks with interest-only mortgages?
A: Yes, you're not reducing the principal during the interest-only period, and payments will increase significantly when the interest-only period ends.