1. What is Interest Only Mortgage?

An interest-only mortgage is a loan where the borrower pays only the interest for a set period, typically between 5-10 years, before starting to pay both principal and interest.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (NZD or AUD)
• \( R \) — Monthly interest rate (annual rate / 12, as a decimal)
• \( Interest \) — Monthly interest payment (NZD or AUD)

Explanation: The calculator converts the annual interest rate to a monthly rate by dividing by 12, then multiplies by the principal amount.

3. Importance of Interest Calculation

Details: Understanding your monthly interest payments helps in budgeting and financial planning, especially during the interest-only period of your mortgage.

4. Using the Calculator

Tips: Enter the principal amount in NZD or AUD and the annual interest rate as a percentage. The calculator will compute your monthly interest-only payment.

5. Frequently Asked Questions (FAQ)

Q1: What happens after the interest-only period ends?
A: Your payments will increase as you start paying both principal and interest, typically switching to a standard principal-and-interest loan.

Q2: Are there any risks with interest-only mortgages?
A: Yes, you're not building equity during the interest-only period, and payments will increase significantly afterward.

Q3: Does ANZ offer interest-only mortgages?
A: Yes, ANZ offers interest-only periods typically up to 5 years for owner-occupiers and up to 10 years for investors.

Q4: How does this differ from a standard mortgage calculator?
A: This calculates only the interest portion, not the combined principal and interest payments of a standard mortgage.

Q5: Can I make principal payments during the interest-only period?
A: Most ANZ loans allow extra repayments, but check your specific loan terms as there may be restrictions.