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Real Estate: how to calculate interest only loan?

Discussion in 'Other Off Topic Forum' started by JimSchad, Dec 19, 2003.

  1. JimSchad

    JimSchad Guest

    152,000 at 6% interest only amortized over 30 years...what is monthly payment?

    Not sure how to calculate as in normal amortization the principle and interest change as the balance goes down.
     
  2. karmavore

    karmavore Formula 3

    Dec 29, 2002
    1,641
    Maryland
    Full Name:
    Luke Colorado
    (Loan AMT * Rate)/12

    Luke.

    PS "amortized over 30 years" has nothing to do with it. 1 year or 100, same payment.
     
  3. Erich

    Erich Formula 3

    Sep 9, 2003
    1,138
    Poway CA
    Full Name:
    Erich Coiner
    Interest only means that you never pay off the principal.
    There is no amotization period, its infinite. :(
     
  4. JimSchad

    JimSchad Guest

    I just didnt think it would be THAT simple, but after searching the net you are correct.
     
  5. JimSchad

    JimSchad Guest

    ah true amortization is pointless. Guess I should have said a 5/6 arm interest only. Fixed at 6% for 5 years then adjusts every 6 months. Can do a refi or sell or stick with it at that point.
     
  6. karmavore

    karmavore Formula 3

    Dec 29, 2002
    1,641
    Maryland
    Full Name:
    Luke Colorado
    I have an Interest only Home Equity (Prime +) and Mortgage (6 month Libor) and have had them since august 2002. So far it's paid off quite well. So far. :)

    Luke.
     
  7. ILuv4Res

    ILuv4Res F1 Veteran
    Owner Lifetime Rossa

    Aug 8, 2002
    6,500
    Full Name:
    Fred
    Jim, I guess you already got your answer here. But to clarify:

    Interest only implies just that.....no pricipal being paid. Therefore it would be simply the annual interest rate times the pricipal balance, then divide by 12 to obtain your monthly payment. Each month the calculation is the same. If the interest rate stays the same and the outstanding pricipal balance stays the same, then the payment will remain the same. If the interest rate changes (assuming it does so exactly at the beginning of the 'month' period), do the same calculation and you will get the new payment amount.

    Interest only loans help with cash-flow, however, you really need to hope there is price appreciation in the property to gain equity over time since there is no reduction in the outstanding principal balance. Unless, of course, you pay down the pricipal in chunks that are at convenient cash-rich times.
     
  8. JimSchad

    JimSchad Guest

    I'll have about 40K in equity on a 190K prop to start with and I plan to use the augmented cash flow to pay down some principle when I can. It just frees up the cash flow and hopefully there will be some appreciation in 5 years so I can sell/refi or something.
     
  9. ILuv4Res

    ILuv4Res F1 Veteran
    Owner Lifetime Rossa

    Aug 8, 2002
    6,500
    Full Name:
    Fred
    Sounds like you have it under control!!

    By the way, which one, if any, of the 3 scenarios we last spoke about did you go with???
     

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