Using ACalculator it is straightforward to compare fixed rate mortgage that has same interest and monthly payment, and interest only mortgage that requires paying the interests only before a balloon payment. Fixed Rate Mortgage vs. Interest Only Mortgage calculator will find out the amount of monthly payment required by each of these two mortgages and let you judge their merit. The reports are nicely designed to illustrate monthly payments, payment schedule, interest only mortgage payment, and a summary result.
Fixed Rate Mortgage
Mortgage with constant rate of interest and monthly payments over the entire life of the mortgage. So, there will be no possibility of any balloon payment at the end of the mortgage term.
Interest Only Mortgage
Special type of ARM requires you to pay the monthly interests only and make balloon payment at the end of the term length to adjust the remaining principal balance. This is a combination of fixed and variable rate mortgage because the payment is fixed for a certain time and after that adjustable rates come into play. But this particular calculator will assume that the rate is fixed over the payment period ranging from 1% to 25%.
Amount of money financed by the mortgage loan.
Term in years
The term length in years over which the debtor will pay off the mortgage. This term can vary from 5 years to 50 years.
Rate of interest charged annually on each type of mortgage.
Monthly amount of money paid as prepayment of principal to reduce the term length of the mortgage.
The amount of principal & interest payments throughout the whole repayment schedule in case of fixed rate mortgage. For interest only ARM, the monthly payment is the amount you pay as interest only payment.