Home
Back
Interest Only Mortgage Formula:
| From: | To: |
An interest-only buy to let mortgage is a type of investment property loan where the borrower only pays the interest on the loan each month, rather than paying down the principal. This results in lower monthly payments but requires a repayment strategy at the end of the mortgage term.
The calculator uses the interest-only mortgage formula:
Where:
Explanation: The formula calculates the monthly interest payment by converting the annual interest rate to a monthly rate and applying it to the principal amount.
Details: Accurate monthly payment calculation is crucial for investment property cash flow analysis, budgeting, and determining rental income requirements to cover mortgage costs.
Tips: Enter the principal amount in euros and the annual interest rate as a percentage. Both values must be positive numbers for accurate calculation.
Q1: What is the main advantage of interest-only mortgages?
A: Lower monthly payments compared to repayment mortgages, which can improve cash flow for property investors.
Q2: How do I repay the principal with an interest-only mortgage?
A: You'll need a separate repayment strategy, typically through property sale, investment returns, or other savings at the end of the mortgage term.
Q3: Are interest-only mortgages widely available in Ireland?
A: While less common than repayment mortgages, some Irish lenders offer interest-only options for buy-to-let properties with specific eligibility criteria.
Q4: What risks are associated with interest-only mortgages?
A: The main risk is not having sufficient funds to repay the principal at the end of the term, potentially leading to forced property sale.
Q5: Can I switch from interest-only to repayment later?
A: Many lenders allow switching to repayment mortgages, but this will increase your monthly payments significantly.