Interest Only Mortgage for 3 Months

B

Breaker

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Hi Everyone,

I have the option of having my mortgage interest only for the first 3 months which i am considering as it would make life an awful lot easier because of all the initial expenses i will have for furnishing my new home.
I am wondering how will this affect my repayments from month 4 and then after.
Will the montly repayment be much greater than the regular repayment would be if the interest only option was not used at all.
Is there a way to calculate this exactly?

Thanks
 
Say the sum borrowed was €200K at 5% over 20 years - this would mean that the first month's interest bill would be about €833. This would mean that by month 4 you would owe €200K + (4 x €833) or €203,333. It is also possible that the interest could be compounded so that after month 1 you owe €200,833 and then they calculate the next month's interest bill on that and so on - I'm not sure. At the end of the 3 months you owe your original capital plus accrued interest and you have 3 months less than the original term to clear it. You should be able to estimate the impact using Karl Jeacle's mortgage calculator.
 
As the interest is being paid monthly surely by the end of month 3 the capital owed will still be the original amount. Only difference will be that remaining payments will be spread over a reduced period (i.e. in the case of a 20 years loan the repayments will be spread over 237 months instead of 240. Amount of repayments can stil be calculated using the reference stated above.
 
Doh! :eek: Sorry - I was thinking a repayment holiday rather than interest only. My apologies. In that case you can estimate your monthly repayments by entering, say, €200K at 5% over 20 years less 3 months into Karl's calculator to compare the repayments to the same mortgage with no interest only period (i.e. over the full 20 years).
 
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