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ANZ Interest Only Mortgage Formula:
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ANZ Interest Only Mortgage is a type of home loan where you only pay the interest portion of the loan for a set period, typically 1-5 years. This results in lower monthly payments initially but doesn't reduce the principal balance.
The calculator uses the interest-only mortgage formula:
Where:
Explanation: The formula calculates only the interest portion of the mortgage payment, excluding any principal repayment during the interest-only period.
Details: Understanding your interest-only payments helps with budgeting during the initial period of your mortgage. It's particularly useful for investors or those with variable income streams.
Tips: Enter your principal loan amount in NZD and the annual interest rate as a percentage. The calculator will compute your monthly interest-only payment.
Q1: What happens after the interest-only period ends?
A: After the interest-only period, your payments will increase as you start paying both principal and interest, which may significantly increase your monthly payments.
Q2: Is interest-only mortgage suitable for everyone?
A: No, it's typically more suitable for investors, those with irregular income, or people who expect their income to increase significantly in the future.
Q3: Are there any risks with interest-only mortgages?
A: Yes, you're not building equity in your property during the interest-only period, and you may face payment shock when the period ends and payments increase.
Q4: Can I make principal payments during interest-only period?
A: Most lenders allow voluntary principal payments, but you should check with ANZ about their specific terms and conditions.
Q5: How does this differ from principal and interest payments?
A: With principal and interest payments, each payment reduces your loan balance. With interest-only, you're only covering the interest cost without reducing the principal.