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Interest Only Mortgage Acceleration Calculator

Interest Only Mortgage Acceleration Calculator

Calculator developed by

Use our calculator to understand how to apply mortgage acceleration to an interest only mortgage to pay down your loan balance and reduce your required monthly payment. With an interest only loan you are required to pay only interest for first part of the mortgage which means accelerating your loan, or paying more than your required monthly payment, reduces your principal balance. The lower your mortgage balance, the lower your required loan payment. Our calculator shows you the reduction in interest expense and your loan balance at the end of the interest only period when you accelerate your loan.

Watch our Interest Only Mortgage Acceleration Calculator "How To" video

Inputs

Indicates the size of mortgage you would like to obtain
Please Enter Mortage Amount
The interest rate for the initial fixed rate, interest only period of an interest only mortgage
Please Select Interest Only Period Interest Rate
Initial time period for an interest only mortgage during which the interest rate is fixed and the borrower only pays interest. The interest only period is typically 3, 5, 7 or 10 years
Please Select Interest Only Period
The date of the first payment of your mortgage. You may input a past date for an existing mortgage. Mortgage payments almost always start on the first of the month
Please Enter Mortgage Start Date
The date when you begin to overpay your mortgage, or pay more than the required monthly mortgage payment. Mortgage payments almost always start on the first of the month
Please Enter Overpayment Start Date
Select "Fixed Monthly Payment" if you plan on making the same payment every month during the interest only period. Select "Fixed Amount of Overpayment" if you plan on overpaying your mortgage by the same amount every month. If you select "Fixed Amount of Overpayment" the mortgage payment you make will go down a little every month. If you select "Fixed Monthly Payment" the amount of your monthly overpayment increases a little every month even though your monthly mortgage payment does not change. Depending on your level of overpayment, making a fixed monthly payment typically results in faster mortgage acceleration, saving you more in interest expense.
Please Select Overpayment Type
The amount of monthly overpayment you intend to make on your mortgage. If you make the same monthly overpayment, your monthly mortgage payment will go down a little every month
Please Enter Amount of Overpayment
Monthly payment value must be greater than the estimated monthly mortgage payment with no acceleration
 
Please Enter Your First & Last Name
Please Enter a Valid First Name
Please Enter a Valid Last Name
 
Please Enter Your Phone Number
Please Enter a Valid Phone
Please Enter Your Email
Please Enter a Valid Email
Your credit score to the best of your knowledge
Please Select Credit Score

Outputs

With No Acceleration
Your required monthly mortgage payment during the initial interest only period
The amount of interest expense during the initial interest only period. With an interest only mortgage, your monthly mortgage payment is 100% interest
Your mortgage balance at the end of the initial interest only period. With an interest only mortgage you do not pay down any principal on your mortgage so the mortgage balance does not change
With Acceleration
The average monthly mortgage payment you intend to make during the initial interest only period, based on making a fixed amount of overpayment every month. If your you make the same monthly overpayment, your monthly mortgage payment will go down a little every month
The amount of interest expense during the initial interest only period, when you overpay your mortgage
Reduction in interest expense during the initial interest only period when you overpay your mortgage as compared to interest expense when you do not overpay. Your overpayment results in lower interest expense during the interest only period because you pay down the principal balance of your mortgage
Your mortgage balance at the end of the initial interest only period, when you overpay your mortgage
Reduction in your mortgage balance at the end of the initial interest only period when you overpay your mortgage as compared to the mortgage balance when you do not overpay. Your overpayment reduces the principal balance of your mortgage

How Our Interest Only Mortgage Acceleration Calculator Works

To use the calculator input your loan amount, interest only period rate, the length of the interest only period, the mortgage start date, overpayment start date, type of overpayment and amount of overpayment.

The calculator enables you to choose how you accelerate the loan -- either by making a fixed monthly payment or a fixed overpayment amount. With a fixed monthly payment, you make the same payment every month. For example, you pay $1,100 every month if your initial required interest only payment is $1,000. This approach actually increases how much you overpay your mortgage because your required payment decrease a little every month as you accelerate your mortgage so your overpayment amount increases gradually over time.

With a fixed overpayment amount, you accelerate your interest only loan by the same amount each month. For example you add $100 to your required payment every month. This means the payment you make goes down a little every month as your required payment decreases. Either acceleration option produces financial benefits and you can choose the approach that works for you.

Based on your selections, the calculator determines your estimated monthly payment, total interest expense during the interest only period and mortgage balance at the end of the interest only period both with and without mortgage acceleration.

The calculator also shows you the reduction in interest expense and your loan balance at the end of the interest only period when you accelerate your loan. You normally do not reduce your loan balance during the interest only phase. For example, if you take out a $300,000 interest only mortgage, your principal balance at the end of the interest only period is unchanged at $300,000.

But when you accelerate an interest only mortgage the entire amount of your overpayment reduces your principal balance, as demonstrated by our calculator. The lower loan balance allows you to offset the potential increase in your monthly payment and interest rate when the mortgage converts into an amortizing loan and you are required to pay both interest and principal.

Mortgage Acceleration for an Interest Only Loan

1

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.

2

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.  

3

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.  

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Current Mortgage Rates as of August 24, 2019
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.
While we pride ourselves on the quality and breadth of the FREEandCLEAR mortgage calculators please note that they should be used for informational purposes only. Our calculators rely on assumptions by us and inputs and assumptions provided by you, which may be inaccurate. The outputs from our calculators are estimates only and should not be used as the sole basis for making any financial decisions. Always consult multiple financial professionals when determining the mortgage size and program that is appropriate for you.

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About the calculator developer

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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