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Interest Only Mortgage Qualification Calculator
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Interest Only Mortgage Qualification Calculator

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Use our Interest Only Mortgage Qualification Calculator to determine what size interest only loan you qualify for based on your net income and monthly debt expenses.  Please note that the calculator uses your net income, also known as your take-home pay, which is your income after deductions for taxes and social security.  The calculator also uses your monthly debt payments, not your total debt balance, to calculate the interest only loan you can afford.  The higher your monthly debt expense, including credit card, auto and student loans, the smaller the loan amount you qualify for.  The more money you make, the higher the loan amount you can afford.
Borrowers can typically qualify for a larger mortgage with an interest only loan because the initial monthly payment is lower than other types of amortizing loans that require you to pay both principal and interest for the entirety of the mortgage.  As demonstrated by our calculator below, with an interest only mortgage, you can afford a larger loan amount with the same monthly payment which means your mortgage dollars stretch further.      

Our Interest Only Qualification Calculator determines your initial monthly payment, which does not include principal, as well as your mortgage balance at the end of the interest only period of the loan.  The initial payment is based on the interest only period rate which may change and increase when the mortgage converts into an amortizing loan and you are required to start paying principal.  A significant increase in your monthly mortgage payment is the primary risk of an interest only loan so you should be sure to understand this downside.
Additionally, as the calculator shows, the principal loan balance at the end of the interest only period is the same as your original mortgage amount which highlights that you do not pay down the loan initially.  The calculator also factors in property tax and insurance so you can understand your total monthly housing expense.  Borrowers can typically afford more home with an interest only mortgage so these other expenses tend to be higher.  We also offer a version of this calculator that does not require personal information.

When you provide valid personal info we may connect you with lenders which enables you to compare mortgage proposals and find the mortgage that is right for you. Click here for a version of this calculator that does not require personal info
The monthly mortgage payment during the initial, interest only period of the mortgage. Mortgage payments during this periodn do NOT include principal
The output provided represents an estimate only. Property tax and insurance rates vary by state, county and property
The mortgage balance at the end of the interest only period is the same as the mortgage balance at the beginning of the loan because you have only paid interest and no principal
Rate Details*
Loan Program:  
Monthly Payment:  
Points  More Info:
Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
Total Lender Fees:  
Loan type:  
Property Value:  
Loan to Value:  
Credit Rating:  
Date Submitted:  
Monthly Housing Payments
P & I More Info
Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
Mortgage Insurance More Info
Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
Property Tax More Info
Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
Homeowner Insurance More Info
Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
Homeowner Association Fee More Info
Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
(If Any)
Total Monthly Housing Payments
Lender Fees
Points More Info
Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
Origination Fee More Info
Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
Credit Report Fee More Info
Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
Tax Service Fee More Info
Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
Processing Fee More Info
Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
Underwriting Fee More Info
Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
Wire Transfer Fee More Info
Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
(If Any)
FHA Upfront Premium More Info
FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
(If any)
VA funding Fee (If any)
Flood Fee
Other Fees More Info

Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

Total Lender Fees
*Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
Current Interest Only Mortgage Rates as of December 11, 2018
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here 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.

Qualifying for an Interest Only Mortgage


Interest Only Mortgage Basics

With an an interest only mortgage you pay only interest and no principal during the first three, five, seven or ten years of the mortgage, which is called the interest only period, and then loan converts into an amortizing mortgage and you pay both principal and interest for the remainder of the mortgage, and the interest rate is subject to change.  Interest only mortgages are often referred to as 3/1, 5/1, 7/1 or 10/1 Interest Only ARMs (IO ARMs) with the first number indicating the length of the interest only period and the second number indicating how frequently the interest rate can change during the adjustable rate period.  For example, with a 7/1 interest only mortgage, you pay only interest at a fixed interest rate for the first seven years of the loan and then you pay both interest and principal plus your mortgage rate is subject to change and potentially increase on an annual basis for the remaining 23 years of the loan.


You Can Afford a Larger Mortgage

Your monthly payment during the interest only period of an interest only mortgage is lower because you do not pay any principal.  Additionally, the interest rate for an interest only mortgage during the interest only period is typically lower than the rate for a 30 year fixed rate mortgage.  A lower interest rate and monthly payment allow you to qualify for a larger mortgage amount as compared to other types of mortgages such as a fixed rate or adjustable rate mortgage (ARM).  The ability to afford a larger mortgage is one of the key benefits of an interest only loan.  Use our Interest Only Mortgage Qualification Calculator to understand the higher loan amount you can afford.


Interest Only Mortgage Borrower Qualification Requirements

Some lenders apply tougher mortgage qualification requirements for interest only mortgages.  For example, lenders may apply a lower loan-to-value (LTV) ratio requirement for interest only mortgages which means borrowers are required to make a larger down payment or have more equity in their homes.  Some interest only mortgage lenders also require borrowers to have higher credit scores.  Additionally, following the collapse of the real estate market, many lenders stopped offering interest only mortgages due to new mortgage regulations and other considerations.  Borrowers may need to contact multiple lenders to find one that offers interest only mortgages and borrowers should be sure to  understand the lender's qualification requirements before moving forward with their mortgage.


Risks of an Interest Only Mortgage

Although interest only mortgages offer benefits such as a lower monthly payment and the ability to qualify for a larger mortgage, borrowers should be sure to consider the risks of an interest only mortgage.  Risks of an interest only mortgage include the possibility that your monthly mortgage payment spikes in the future.  When your mortgage changes from an interest only loan to an amortizing mortgage, your mortgage payment typically increases because you start paying both interest and principal plus your interest rate can increase which would cause your payment to jump even more.  Interest only mortgages are typically better suited for borrowers with a higher risk appetite or who are going to sell their homes and pay off their loan before the end of the interest only period.  Borrowers who prefer certainty and financial security should not select an interest only mortgage due to the potential risk of payment shock.  Our Interest Only Mortgage Mortgage Qualification Calculator highlights that you have paid down none of you principal loan balance at the end of the loan's initial interest only period.


Pay Down the Loan on Your Schedule

Just because an interest only mortgage does not require you to pay principal during the initial phase of the loan does not mean you cannot do it. Many borrowers elect to pay down their principal loan balance by adding extra payments or making a lump sum payment annually or semi-annually.  This is why interest only loans are well suited for applicants with significant income fluctuations or who earn a meaningful portion of their income from bonuses or commissions.  The flexibility of an interest only mortgage enables these borrowers to pay down principal on a schedule that better matches the timing and amount of their earnings.  

More FREEandCLEAR Mortgage Resources

Mortgage Guides

Interest Only Mortgage Basics

Review our in-depth overview of how an interest only mortgage works including key program terms, benefits of an interest only mortgage and helpul examples


Risks of an Interest Only Mortgage

Understand the downsides of an interest only mortgage including a potential significant jump in your payment when you are required to start paying principal


Interest Only Mortgage Rates

Review interest rates for only mortgages based on interest only period length, loan-to-value (LTV) ratio and other factors.  Comparing proposals from multiple lenders is the best way to save money on your interest only mortgage


What Mortgage Program Is Right for Me?

Compare the pros and cons of an Interest Only Mortgage to other mortgage programs such as a fixed rate or adjustable rate mortgage (ARM) to select the program that is right for you


Interest Only Mortgage: https://www.fdic.gov/consumers/consumer/interest-only/index.html

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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