Also known as Pension Mortgages or Due-On-Sale Mortgages.
An interest-only mortgage is a loan with monthly payments only on the interest of the amount borrowed for an initial term (typically seven to 10 years) at a fixed interest rate. The interest-only mortgage payment calculator shows what your monthly mortgage payment would be by factoring in your interest-only loan term, interest rate and loan amount.
This means you get an estimated interest-only mortgage payment for the interest-only term. It doesn’t account for the principal payments when the loan begins amortizing.
(Interest rate % * Loan amount) / 12 = Monthly payment
So, if you have a 7 percent interest rate and a GHs400,000 loan, you’d plug in:
(0.07 * 400,000) / 12 = GHs2,333.33 monthly payment
If you want to get an interest-only mortgage, you need to have a plan for what you’ll do once the interest-only payments end. Do you expect to be making more money by then to cover your increased payment?
PENSION MORTGAGES
At DCANS Developments Ghana, we can get an interest-only mortgage, with your future lump sum or some other acceptable capital repayment vehicle. Learn more.
ADVANTAGES
- Smaller initial payment: You'll have a reduced payment for the intro period, freeing up your money for other purposes.
- Can get tax benefits: Because interest payments on your primary residence are tax-deductible, 100 percent of your interest-only mortgage is tax-deductible if you itemize.
- Great if you have variable income: A low initial payment can be good if you’re going through a period where your income is ebbing and flowing.
DISADVANTAGES
- Harder to qualify for: Interest-only mortgages have more stringent requirements, including a higher credit score, higher income and more cash reserves.
- Slower to build equity: Since you’re not paying down your principal during the interest-only period, your equity only grows if your home value goes up.
- Your payment can go up: Once the interest-only period ends, your payment can go way up.
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