Interest Only Mortgage
Author: Terri Ewing
Published: August 14, 2008
Interest Only Mortgage Defined
An interest only mortgage is a mortgage with a payment type that requires payments only of the interest due. In contrast, the fully amortized payment type requires both the interest and principal be included in the payment. That way you are paying the interest due and you are also paying down the amount borrowed.
An interest only mortgage does not lower your principal with each payment. If you had a 15 year interest only mortgage and you paid the interest only amount each month, your loan balance at the end of the 15 years is the same as when you started.
To calculate a fully amortized mortgage payment you have to have a mortgage calculator. For an interest only payment, you take the interest rate times your loan amount and then divide by twelve. 6.0% X $100,000 is $6,000 and divided by 12 is $500. $500 would be your interest only payment.
You can use the link to read about how interest only mortgage advertisers added to the foreclosure crisis.
Author: Terri Ewing
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