Interest only loan question

Feel like I should know the answer but
how is an interest only mortgag figured? like simple interest?
(int rate) X (principle) div by 12 = mo. pmt?

what is the advantage for buyer over say a conventional mtg amortized over 40 yrs

examp $100K 40yr 8% is $696/mo

simple int would be $667

$29/mo diff dosen’t seem worth it so I must figure wrong


You figured right…There is not much diference.

Look at monthly payment on 100 Year mortgages, etc. Look at how much of the inital payments on a 30/40 year mortgage are interest as aposed to principal.

Bottom line is this…the lender is going to make their money. And every product is designed to give an investor nearly the same yield.

thanks so much
now I don’t feel like such a dumb bunny! ;D

well, with an interest only loan, everytime you pay toward the principal balance, your interest only payment decreases. so if you make the same monthly payment on an interest only mort that you would if it were principal and interest, the loan will be paid off faster with interest only.