Use this calculator to compare the monthly payment on an interest only mortgage vs. the payment on a conventional mortgage.
Interest Only Calculator
More on Interest-Only Mortgages
Interest-only mortgages require the borrower to pay only the loan interest during a set period of time, normally the first 5 or 10 years of a mortgage. After this interest-only period - the principal balance is amortized over the remaining term of the loan. The benefit to the homeowner is a lower monthly payment during the interest-only period. The downside is, during the same period, the principal balance does not go down. Also - since lenders assume more risk in an interest-only mortgage, the interest rate is typically higher than a conventional mortgage.
Homeowners should consider all the risks associated with an interest-only mortgage before committing themselves. Some financial experts advise not to take out an interest-only mortgage, arguing there are usually other more favorable options to reduce your expenses.