New York Mortgage Company

Archive for the ‘Interest Only / Fully Amortized’ Category

Interest only loans are loans in which your monthly payment is based solely on the interest portion of the loan. You have the option of sending in extra money to pay down the principal but are not obligated to. The principal balance is usually due in a lump sum balloon payment at the end of the predetermined term of the loan. This type of loan is good for people who want to keep there monthly payments as low as possible and/or someone who wants to keep a house for a short period of time with out putting to much money into it and/or if you want to keep your monthly payments down and use your yearly tax return money to pay down the principal. Which ever reason is right for you, you can figure out your interest only payments by using the following simple formula: Multiply the loan amount by the interest rate (be sure to include decimals and/or percentage signs) and divide it by 12.
Example:

$300,000 - Loan Amount
X 5.5% - Interest Rate
________

= 16,500
________

Divided by 12
_____________
= $1,375 / Month

Amortized Loans are loans in which a repayment schedule plan is based on equal installments of principal and interest from a starting loan dollar amount down to a balance of zero. An amortized loan makes it easier to ensure the balance of the loan will be paid down to zero by the time the loan term ends.