1. What is the NatWest Interest Only Calculator?

The NatWest Interest Only Calculator calculates the monthly payment for an interest-only mortgage or loan. This type of payment structure means you only pay the interest each month, with the principal amount remaining unchanged.

2. How Does the Calculator Work?

The calculator uses the interest-only formula:

Where:

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

Explanation: The formula calculates the monthly interest payment by converting the annual rate to a monthly rate and applying it to the principal amount.

3. Importance of Interest-Only Calculation

Details: Understanding interest-only payments helps borrowers plan their finances, especially for mortgages or loans where only interest is paid initially, with principal repayment due later.

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, rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is an interest-only mortgage?
A: An interest-only mortgage requires paying only the interest each month, with the principal repaid in full at the end of the term.

Q2: How does this differ from a repayment mortgage?
A: In a repayment mortgage, monthly payments cover both interest and principal, reducing the balance over time.

Q3: What are the advantages of interest-only?
A: Lower monthly payments initially, which can help with cash flow or investment opportunities.

Q4: What are the risks?
A: The principal remains unchanged, so you need a plan to repay it at the end of the term.

Q5: Is this specific to NatWest?
A: While designed for NatWest, the formula applies generally to interest-only calculations across various lenders.