interest only mortgage calculator excel formula

So paying down personal debt frees up useable equity, whereas paying investment debt may not.ģ) It can help you save on tax. This isn’t available for many investment properties, because they are highly leveraged. Most investors borrow against their main home to fund the deposit for an investment property. If worst comes to worst you can always sell your investment property to pay back the mortgage, but you may not want to sell your main home if you get into a tricky financial situation.Ģ) It can help you grow your portfolio more quickly. They’ll then use that money to pay down their own personal debt more aggressively.ġ) It helps to protect your main home. In this case, the borrower will take the money they would have used to pay down their investment mortgage. Similarly, if you have an owner-occupier mortgage, it is generally better to pay this down first rather than paying back debt on your own home and your investment property at the same time. This means the total amount of interest you pay goes up in a straight line.

Why? Because you are only paying interest the size of your loan never decreases. These mortgages are typically set to a 30-year term, and interest rates fluctuate depending on how long the borrower wants to fix the interest rate for.Īs stated above, interest-only loans are a temporary loan structure where the borrower only pays the interest on the loan and doesn’t pay any of the principal mortgage back.Īs ironic as it may sound, investors who take out interest-only loans do end up paying more interest over time. Principal and interest loans are most common with owner-occupiers and repayments are both the interest on the loan (the cost of borrowing money from the bank) and a portion of the actual money you loaned from the bank. In the big wide world there are two types of mortgages: principal and interest (P+I) and interest-only loan. What’s the difference between an interest-only and a principal and interest loan?

Interest only mortgage calculator excel formula