Not yet registered? Create a OverBlog!

Create my blog

How interest only loan calculators work

An interest-only calculator enables you to see how much you will pay in monthly debt interest. You may have a buy-to-let mortgage and want to keep the repayments to a minimum. An interest-only loan is very affordable, but you'll need to make arrangements to repay the principal at the conclusion of the mortgage term.

How to use an interest-only loan calculator

How much do you want to borrow?
How much you can borrow depends upon several factors such as earnings, home equity and credit history.
You may just want to refinance to get a better rate on your current mortgage. Other homeowners are looking for a way to borrow additional money, so that they can consolidate debt or buy a new car. What is the interest rate?
The cost of borrowing will be determined by a combination of the Loan-to-Value (LTV) and your creditworthiness.
Borrowing a higher percentage of the equity makes it potentially harder for the lender to recover its money if you were to default on the agreement.
Lenders use personal pricing to determine the Annual Percentage Rate (APR). What's the term of the loan?
The term isn't as important as it is for repayment mortgages.
However, a fixed-rate mortgage for 5 years will cost you more.
This is because it is far more difficult for the lender to determine the direction of central bank rates.

Repaying the loan principal

Importance
Unless you have a means of repaying the principal, you've not made any inroads into repaying the money that you've borrowed.
Mortgage payments may be lower, but you will have to get a remortgage and start the process from scratch. Exceptions
If you are planning to sell a property to cash-in on the equity, just repaying the interest could work for you.
Buy-to-let investors want to keep their repayments to a minimum because it's relatively common to sell-on the house within five to ten years. Repayment plan
If you have a personal loan or a mortgage, you need to establish a means of repaying the capital that you have borrowed.
This could come in the form of a high-interest saving account or investment plan.
However, you are totally responsible for ensuring that there is sufficient money in the pot to repay all of the cash that you've borrowed.

Same category articles Accounting

How to use interest only calculators

How to use interest only calculators

An interest-only loan involves making a monthly repayment which is sufficient to pay off the interest which has accrued during that month. You will not be repaying the principal. So, you will have to make alternative arrangements to make repayment under a separate investment vehicle. Here is how to use an interest-only calculator to determine how much money you will save.
How to budget for household bills

How to budget for household bills

Managing your household bills can be difficult, especially when times are tough. There are however some do's and don'ts to follow which will allow you to budget effectively.
A guide to PAYE wage slips

A guide to PAYE wage slips

This article will provide you with a brief guide on PAYE Wage slips for those who are unaware of them. PAYE Wage slips are probably the most common type of wage slip and this article will broaden our knowledge on them.
What should be included on a household budget template

What should be included on a household budget template

Do you create a family budget? Have you ever wondered of what happened to the money that seemed to go faster than it came? What you need is a budget and all that it takes are some expenses spreadsheet templates to get you going. Or, you can create a spreadsheet (Excel) budget yourself. Continue reading to learn how best it is to budget your money.