Talk:Interest-only loan
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[edit] I have an interest-only mortgage calculator
that allows people to compare 4 loan options and its contrast with a regular mortgage. It may be useful to Wikipedia users.
The link here is: {spam redacted}}
[edit] General disclaimer
Hello, I put on the general disclaimer as a protection for innocent readers. I think this article is still sketchy and gives little warning of risks. If you don't agree, I'm willing to discuss it and even be convinced otherwise.Rich 07:54, 11 November 2006 (UTC)
[edit] Moved section concerning calculations - June 2008
I moved this section to the talk page because the information needed to be sourced before completing any more editing and wikifying:
[edit] Calculating an interest-only payment
Calculating an interest only payment is very simple when compared to calculating an amortizing payment. When calculating for a monthly interest only payment, one simply multiplies the monthly interest rate times the principal.
For example, the principal on a particular interest only loan is $10,000. The yearly interest rate is 6%. Therefore, the monthly interest rate is 0.5%. (6/12 = 0.5) To calculate the payment, multiply the .5% or .005 X 10,000 which results in a payment of $50.00. This payment is due each month. This seems like a steal, but when applied to the more typical numbers of a mortgage, such as a $200,000 mortgage at 8% yearly, the interest only payment would be $1,333.33 each month. Then, when you consider the payment on a mortgage with the same numbers amortizing over 30 years is $1,467.53, it may not look like the interest only loan is such a great deal because no principal is paid during those first number of years. While some may take the money saved by doing an IO loan and put them to better use than just paying down the mortgage, it can also be argued that this amount will go to less-than-efficient items (i.e. more liabilities).
