Fixed-rate mortgage: A fixed-rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to pay off the mortgage balance at the end of the term. The most common terms are 15 years and 30 years.
Interest-only mortgage: An interest-only mortgage only requires monthly interest payments. Because you are not paying any principal, this can lower your monthly payment. However, because your mortgage's principal balance is not decreased, you will have a balloon payment at the end of the mortgage's term. Some interest-only mortgages will also be adjustable-rate mortgages, or ARMs. An interest only ARM will often have a period where the interest rate is fixed, and then it is adjusted annually. This calculator assumes that the interest rate for your interest only mortgage remains fixed for the entire term.
Mortgage amount: Expected balance for your mortgage.
Term in years: The number of years over which you will repay this mortgage. The most common mortgage terms are 15 years and 30 years. Please note that for the interest-only mortgage you will have a balloon payment for the entire principal balance at the end of the loan term.
Interest rate: Annual interest rate for each mortgage type.
Prepayment: A monthly prepayment of principal you would like to apply to your interest only mortgage balance.
Monthly payment: Monthly principal and interest payment, or PI, for the fixed-rate mortgage. This is an interest-only payment for an interest-only ARM.