Fixed Rate Mortgage vs. Interest Only Mortgage
A fixed rate mortgage has the same payment for the entire term of the loan. Use
this calculator to compare a fixed rate mortgage to Interest Only Mortgage.
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Current Mortgage Rate Information
Fixed Rate Mortgage Information
Interest Only Mortgage Information
Definitions
- Fixed Rate Mortgage
- A fixed rate mortgage has the same interest rate and
monthly payment throughout the term of the mortgage. The payment is calculated
to payoff the mortgage balance at the end of the term. The most common terms
are 15 year and 30 years.
- Interest Only Mortgage
- An Interest Only mortgage only requires monthly
interest payments. Since you are not paying any principal, this can lower your
monthly payment. However, since your mortgage's principal balance is not
decreased, you will have a balloon payment at the end of the mortgage's term.
Some Interest Only mortgages will also be adjustable rate mortgages (ARM). An
Interest Only ARM will often have a period where the interest rate is fixed,
and then it is adjusted annually. This calculator assumes that the interest
rate for your Interest Only Mortgage remains fixed for the entire term.
- Mortgage amount
- Expected balance for your mortgage.
- Term in years
- The number of years over which you will repay this
mortgage. The most common mortgage terms are 15 years and 30 years. Please note
that for the Interest Only Mortgage you will have a balloon payment for the
entire principal balance at the end of the loan term.
- Interest rate
- Annual interest rate for each mortgage type.
- Prepayment
- A monthly prepayment of principal you would like to apply to
your Interest Only Mortgage balance.
- Monthly payment
-
Monthly principal and interest payment (PI) for the Fixed Rate Mortgage. This
is an interest only payment for an Interest Only ARM.
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