Hello Everyone………….Does anyone know where I can get a chart or mathematical representatipon of exactly how the theory of an interest only Mortgage loan operates, including options for extra repayments and their effect on the principle and consequently impacting on repayments………………Thanks Steddi S.A.
Theoretically the loan will never be reduced unless you make the additional repayments – in practice the Io period is usually from 5-10 years so the loan reduces after that.
I don't have any chart you can use but the IO loan will always cost you less each week than the P&I loan. Money which can be used for additional investments.
Hi Steddi,
Most loans have interest calculated daily and charged monthly.
If the loan is Interest Only then you are charged the interest rate multiplied by the principal outstanding divided by 365 for each day. If the principal remains the same for the month then you multiply the no of days in the month by the daily rate.
If you have repaid principal once in the month the you do two calculations and add the results and so on.You might find these ones useful:
http://www.domain.com.au/Public/FinancialCalculators.aspx
Cheers,
Anthony.
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