Interest Only Mortgage Acceleration Calculator
Understand how you can apply mortgage acceleration to an interest only mortgage. Our calculator demonstrates how mortgage acceleration (paying more than the required mortgage payment) reduces your total interest expense during the interest only period and lowers your principal mortgage balance at the end of the period. Applying mortgage acceleration to an interest only mortgage also allows you to offset the potential increase in your monthly mortgage payment when the mortgage converts into an adjustable rate mortgage at the end of the interest only period. Our interest only mortgage acceleration calculator enables you to evaluate either a fixed monthly payment (that exceeds the required monthly payment) or a fixed amount of monthly overpayment
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Mortgage Acceleration for an Interest Only Loan
Benefits of Accelerating an Interest Only Mortgage
The main benefits of applying mortgage acceleration to an interest only mortgage are that you can reduce your required mortgage payment during the interest only period of the loan and also help manage the increase in payment when the loan converts to an amortizing mortgage and the borrower is required to start paying principal. Because your required monthly payment during the interest only period of the loan is based on your outstanding mortgage balance, when you accelerate your loan and reduce your loan balance you also reduce your required monthly payment. The more you accelerate your loan, the lower the required monthly payment. Additionally, if you do not accelerate an interest only mortgage your monthly mortgage payment usually increases significantly when the borrower is required to start paying principal in addition to interest. Applying mortgage acceleration during the interest only period helps to offset the potential jump in payment when the loan amortizes because your new payment is based on a lower mortgage balance.
You Can Accelerate an Interest Only Mortgage for Free
You should not have to pay any special fees to accelerate an interest only loan. Some banks and companies offer programs that charge borrowers to implement a mortgage acceleration; however, you can accelerate your interest only mortgage for free. Most mortgage acceleration programs offer borrowers little or no value and perform a function that borrowers can do on their own for no cost. Additionally, many companies providing mortgage acceleration programs have engaged in fraud in the past. To implement mortgage acceleration add the amount by which you want to overpay your loan to your mortgage payment and indicate to your lender that the extra funds are applied to your principal mortgage balance. For example, if your required mortgage payment is $1,200, make a payment of $1,500 and let the lender know that the extra $300 goes to paying down your loan balance.
How and When You Can Accelerate an Interest Only Mortgage
Borrowers can accelerate their mortgage by any amount at any point over the life of their loan. With an interest only mortgage, accelerating your loan during the interest only period provides added benefits but borrowers can continue mortgage acceleration when the loan starts to amortize. Additionally, borrowers can start and stop mortgage acceleration when they want to and adjust the amount by which they overpay their mortgage. For example, borrowers that receive a large annual bonus may decide to make one significant extra payment per year while other borrowers may decide to accelerate their loans monthly or every other month. Borrowers have flexibility to apply mortgage acceleration in the way that best meets their financial priorities.
More FREEandCLEAR Mortgage Resources
Review our in-depth explanation of how you can apply mortgage acceleration to an interest only mortgage to reduce your required mortgage payment, cut the length of your mortgage and save money on total interest expense over the life of your loan.
Review interest only mortgage rates for leading lenders in your area based on interest only period, loan-to-value (LTV) ratio and other inputs. Comparing interest only mortgage rates from multiple lenders is the best way to find the mortgage that is right for you
Review our comprehensive overview of how an interest only mortgage works including key program terminology, reasons to select and interest only mortgage and informative examples
Money and time-saving advice that addresses a wide range of mortgage topics from an expert with over forty years of industry experience