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Interest Only Mortgage Formula:
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The Interest Only Mortgage Calculator calculates the monthly interest-only payment for NAB (National Australia Bank) mortgages. This type of mortgage payment covers only the interest portion of the loan, with the principal amount remaining unchanged.
The calculator uses the interest-only mortgage formula:
Where:
Explanation: The calculation converts the annual interest rate to a monthly rate and applies it to the principal amount to determine the monthly interest-only payment.
Details: Understanding interest-only payments helps borrowers plan their finances, especially during the interest-only period of their mortgage. It provides lower initial payments but requires careful financial planning for when principal payments begin.
Tips: Enter the principal amount in currency units and the annual interest rate as a percentage. Both values must be positive numbers to calculate a valid monthly payment.
Q1: What is an interest-only mortgage?
A: An interest-only mortgage is a loan where the borrower pays only the interest for a set period, after which they must start paying both principal and interest.
Q2: How long is the interest-only period typically?
A: Interest-only periods typically range from 1-10 years, depending on the lender and loan terms.
Q3: What happens after the interest-only period ends?
A: After the interest-only period, payments increase significantly as they include both principal and interest repayment.
Q4: Are interest-only mortgages suitable for everyone?
A: Interest-only mortgages are best for borrowers with irregular income, investment properties, or those who expect significant future income increases.
Q5: Does NAB offer interest-only mortgages?
A: Yes, NAB offers interest-only mortgage options for both owner-occupiers and investors, subject to eligibility criteria.