1. What is Interest-Only Mortgage?

An interest-only mortgage is a type of loan where the borrower pays only the interest for a set period, typically 5-10 years. After this period, the borrower must repay the principal in full or refinance the loan.

2. How Does the Calculator Work?

The calculator uses the interest-only mortgage formula:

Where:

• \( P \) — Principal amount (currency units)
• \( R \) — Annual interest rate (%)

Explanation: This formula calculates only the interest portion of the mortgage payment, not including any principal repayment.

3. Importance of Interest-Only Calculation

Details: Understanding interest-only payments helps borrowers plan their finances during the interest-only period and prepare for the eventual principal repayment.

4. Using the Calculator

Tips: Enter the principal amount in currency units and the annual interest rate as a percentage. Both values must be valid (principal > 0, interest rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What happens after the interest-only period ends?
A: After the interest-only period, you'll need to repay the full principal amount, either through a lump sum payment or by refinancing to a repayment mortgage.

Q2: Are interest-only mortgages risky?
A: They can be riskier than repayment mortgages as you're not reducing the principal debt during the interest-only period.

Q3: Who typically uses interest-only mortgages?
A: They're often used by investors who plan to sell the property for a profit or those with irregular income who expect to have a large sum available later.

Q4: Does Nationwide offer interest-only mortgages?
A: Nationwide does offer interest-only mortgages, but they have specific eligibility criteria and require a credible repayment strategy.

Q5: Can I switch from interest-only to repayment?
A: Many lenders, including Nationwide, allow you to switch to a repayment mortgage during your term, subject to affordability checks.