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Interest Only Mortgage Acceleration Calculator
FREEandCLEAR 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.

Inputs
By clicking "CALCULATE" you authorize companies to contact you using the information you provided. This authorization overrides any previous registrations on federal, state, or private Do Not Call registries or any private solicitation preference you previously expressed. You agree that lenders may use automatic dialing systems to make calls to any phone number entered, even to a cell phone or other service for which the called party is charged. You understand that consent is not a condition of purchase.
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 Monthly mortgage payment you intend to make during the initial interest only period, including overpayment
 
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
 
 
Thank you for submitting your calculation. We may provide your information to a mortgage acceleration program provider. Continue to use the calculator and perform as many calculations as you like as your contact info is only submitted once.

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.  

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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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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.

More FREEandCLEAR Mortgage Resources

Mortgage Guides

How to Apply Mortgage Acceleration to an Interest Only Mortgage

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.

Resources

Interest Only Mortgage Rates

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

Programs

How an Interest Only Mortgage Works

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

Resources

Mortgage Expert Insights

Money and time-saving advice that addresses a wide range of mortgage topics from an expert with over forty years of industry experience

Mortgage Calculators

Interest Only Mortgage Qualification Calculator

Understand what size mortgage you can afford with an interest only loan.  You can usually qualify for a higher loan amount with an interest only mortgage because your initial monthly payment is lower

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

Harry Jensen LinkedInLinkedIn | Email Harry JensenEmail
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