# 20 Year Fixed Interest-Only Mortgage

In this example, we'll look at a 20 year fixed-rate mortgage where you may make interest-only payments during the first 10 years. After that the mortgage is fully amortized. Thus, the payment will increase at the beginning of the 11th year even though the interest rate will remain unchanged over the life of the loan. Since it is a fixed-rate mortgage the minimum, maximum and starting interest rate will be the same and the index rate, margin and adjustments are ignored.

After reviewing this example, use the interest-only mortgage calculator to help you decide if an interest-only mortgage meets your needs.

Interest-Only Calculator
After 10 years that the principal balance remains at the original loan amount and more than \$10,000 per year has been paid in interest. At the beginning of year 11 the loan is fully amortized and the minimum monthly payment jumps \$950 to \$1,817, an increase of 110%! Note that the payment shock when entering the fully amortizing period is much greater for shorter term loans than longer ones.
Stable
MonthInterest
Rate
Index
Rate
Payment Interest Principal Balance
16.500%0.000%\$867\$867\$0\$160,000
26.500%0.000%\$867\$867\$0\$160,000
36.500%0.000%\$867\$867\$0\$160,000
46.500%0.000%\$867\$867\$0\$160,000
56.500%0.000%\$867\$867\$0\$160,000
66.500%0.000%\$867\$867\$0\$160,000
76.500%0.000%\$867\$867\$0\$160,000
86.500%0.000%\$867\$867\$0\$160,000
96.500%0.000%\$867\$867\$0\$160,000
106.500%0.000%\$867\$867\$0\$160,000
116.500%0.000%\$867\$867\$0\$160,000
126.500%0.000%\$867\$867\$0\$160,000
Year 1  \$10,400\$10,400\$0
136.500%0.000%\$867\$867\$0\$160,000
146.500%0.000%\$867\$867\$0\$160,000
156.500%0.000%\$867\$867\$0\$160,000
166.500%0.000%\$867\$867\$0\$160,000
176.500%0.000%\$867\$867\$0\$160,000
186.500%0.000%\$867\$867\$0\$160,000
196.500%0.000%\$867\$867\$0\$160,000
206.500%0.000%\$867\$867\$0\$160,000
216.500%0.000%\$867\$867\$0\$160,000
226.500%0.000%\$867\$867\$0\$160,000
236.500%0.000%\$867\$867\$0\$160,000
246.500%0.000%\$867\$867\$0\$160,000
Year 2  \$10,400\$10,400\$0
256.500%0.000%\$867\$867\$0\$160,000
266.500%0.000%\$867\$867\$0\$160,000
276.500%0.000%\$867\$867\$0\$160,000
286.500%0.000%\$867\$867\$0\$160,000
296.500%0.000%\$867\$867\$0\$160,000
306.500%0.000%\$867\$867\$0\$160,000
316.500%0.000%\$867\$867\$0\$160,000
326.500%0.000%\$867\$867\$0\$160,000
336.500%0.000%\$867\$867\$0\$160,000
346.500%0.000%\$867\$867\$0\$160,000
356.500%0.000%\$867\$867\$0\$160,000
366.500%0.000%\$867\$867\$0\$160,000
Year 3  \$10,400\$10,400\$0
376.500%0.000%\$867\$867\$0\$160,000
386.500%0.000%\$867\$867\$0\$160,000
396.500%0.000%\$867\$867\$0\$160,000
406.500%0.000%\$867\$867\$0\$160,000
416.500%0.000%\$867\$867\$0\$160,000
426.500%0.000%\$867\$867\$0\$160,000
436.500%0.000%\$867\$867\$0\$160,000
446.500%0.000%\$867\$867\$0\$160,000
456.500%0.000%\$867\$867\$0\$160,000
466.500%0.000%\$867\$867\$0\$160,000
476.500%0.000%\$867\$867\$0\$160,000
486.500%0.000%\$867\$867\$0\$160,000
Year 4  \$10,400\$10,400\$0
496.500%0.000%\$867\$867\$0\$160,000
506.500%0.000%\$867\$867\$0\$160,000
516.500%0.000%\$867\$867\$0\$160,000
526.500%0.000%\$867\$867\$0\$160,000
536.500%0.000%\$867\$867\$0\$160,000
546.500%0.000%\$867\$867\$0\$160,000
556.500%0.000%\$867\$867\$0\$160,000
566.500%0.000%\$867\$867\$0\$160,000
576.500%0.000%\$867\$867\$0\$160,000
586.500%0.000%\$867\$867\$0\$160,000
596.500%0.000%\$867\$867\$0\$160,000
606.500%0.000%\$867\$867\$0\$160,000
Year 5  \$10,400\$10,400\$0
616.500%0.000%\$867\$867\$0\$160,000
626.500%0.000%\$867\$867\$0\$160,000
636.500%0.000%\$867\$867\$0\$160,000
646.500%0.000%\$867\$867\$0\$160,000
656.500%0.000%\$867\$867\$0\$160,000
666.500%0.000%\$867\$867\$0\$160,000
676.500%0.000%\$867\$867\$0\$160,000
686.500%0.000%\$867\$867\$0\$160,000
696.500%0.000%\$867\$867\$0\$160,000
706.500%0.000%\$867\$867\$0\$160,000
716.500%0.000%\$867\$867\$0\$160,000
726.500%0.000%\$867\$867\$0\$160,000
Year 6  \$10,400\$10,400\$0
736.500%0.000%\$867\$867\$0\$160,000
746.500%0.000%\$867\$867\$0\$160,000
756.500%0.000%\$867\$867\$0\$160,000
766.500%0.000%\$867\$867\$0\$160,000
776.500%0.000%\$867\$867\$0\$160,000
786.500%0.000%\$867\$867\$0\$160,000
796.500%0.000%\$867\$867\$0\$160,000
806.500%0.000%\$867\$867\$0\$160,000
816.500%0.000%\$867\$867\$0\$160,000
826.500%0.000%\$867\$867\$0\$160,000
836.500%0.000%\$867\$867\$0\$160,000
846.500%0.000%\$867\$867\$0\$160,000
Year 7  \$10,400\$10,400\$0
856.500%0.000%\$867\$867\$0\$160,000
866.500%0.000%\$867\$867\$0\$160,000
876.500%0.000%\$867\$867\$0\$160,000
886.500%0.000%\$867\$867\$0\$160,000
896.500%0.000%\$867\$867\$0\$160,000
906.500%0.000%\$867\$867\$0\$160,000
916.500%0.000%\$867\$867\$0\$160,000
926.500%0.000%\$867\$867\$0\$160,000
936.500%0.000%\$867\$867\$0\$160,000
946.500%0.000%\$867\$867\$0\$160,000
956.500%0.000%\$867\$867\$0\$160,000
966.500%0.000%\$867\$867\$0\$160,000
Year 8  \$10,400\$10,400\$0
976.500%0.000%\$867\$867\$0\$160,000
986.500%0.000%\$867\$867\$0\$160,000
996.500%0.000%\$867\$867\$0\$160,000
1006.500%0.000%\$867\$867\$0\$160,000
1016.500%0.000%\$867\$867\$0\$160,000
1026.500%0.000%\$867\$867\$0\$160,000
1036.500%0.000%\$867\$867\$0\$160,000
1046.500%0.000%\$867\$867\$0\$160,000
1056.500%0.000%\$867\$867\$0\$160,000
1066.500%0.000%\$867\$867\$0\$160,000
1076.500%0.000%\$867\$867\$0\$160,000
1086.500%0.000%\$867\$867\$0\$160,000
Year 9  \$10,400\$10,400\$0
1096.500%0.000%\$867\$867\$0\$160,000
1106.500%0.000%\$867\$867\$0\$160,000
1116.500%0.000%\$867\$867\$0\$160,000
1126.500%0.000%\$867\$867\$0\$160,000
1136.500%0.000%\$867\$867\$0\$160,000
1146.500%0.000%\$867\$867\$0\$160,000
1156.500%0.000%\$867\$867\$0\$160,000
1166.500%0.000%\$867\$867\$0\$160,000
1176.500%0.000%\$867\$867\$0\$160,000
1186.500%0.000%\$867\$867\$0\$160,000
1196.500%0.000%\$867\$867\$0\$160,000
1206.500%0.000%\$867\$867\$0\$160,000
Year 10  \$10,400\$10,400\$0
1216.500%0.000%\$1,817\$867\$950\$159,050
1226.500%0.000%\$1,817\$862\$955\$158,095
1236.500%0.000%\$1,817\$856\$960\$157,134
1246.500%0.000%\$1,817\$851\$966\$156,169
1256.500%0.000%\$1,817\$846\$971\$155,198
1266.500%0.000%\$1,817\$841\$976\$154,222
1276.500%0.000%\$1,817\$835\$981\$153,240
1286.500%0.000%\$1,817\$830\$987\$152,254
1296.500%0.000%\$1,817\$825\$992\$151,261
1306.500%0.000%\$1,817\$819\$997\$150,264
1316.500%0.000%\$1,817\$814\$1,003\$149,261
1326.500%0.000%\$1,817\$808\$1,008\$148,253
Year 11  \$21,801\$10,054\$11,747
1336.500%0.000%\$1,817\$803\$1,014\$147,239
1346.500%0.000%\$1,817\$798\$1,019\$146,220
1356.500%0.000%\$1,817\$792\$1,025\$145,195
1366.500%0.000%\$1,817\$786\$1,030\$144,165
1376.500%0.000%\$1,817\$781\$1,036\$143,129
1386.500%0.000%\$1,817\$775\$1,041\$142,088
1396.500%0.000%\$1,817\$770\$1,047\$141,040
1406.500%0.000%\$1,817\$764\$1,053\$139,988
1416.500%0.000%\$1,817\$758\$1,058\$138,929
1426.500%0.000%\$1,817\$753\$1,064\$137,865
1436.500%0.000%\$1,817\$747\$1,070\$136,795
1446.500%0.000%\$1,817\$741\$1,076\$135,719
Year 12  \$21,801\$9,267\$12,534
1456.500%0.000%\$1,817\$735\$1,082\$134,637
1466.500%0.000%\$1,817\$729\$1,087\$133,550
1476.500%0.000%\$1,817\$723\$1,093\$132,457
1486.500%0.000%\$1,817\$717\$1,099\$131,357
1496.500%0.000%\$1,817\$712\$1,105\$130,252
1506.500%0.000%\$1,817\$706\$1,111\$129,141
1516.500%0.000%\$1,817\$700\$1,117\$128,024
1526.500%0.000%\$1,817\$693\$1,123\$126,900
1536.500%0.000%\$1,817\$687\$1,129\$125,771
1546.500%0.000%\$1,817\$681\$1,136\$124,635
1556.500%0.000%\$1,817\$675\$1,142\$123,494
1566.500%0.000%\$1,817\$669\$1,148\$122,346
Year 13  \$21,801\$8,428\$13,373
1576.500%0.000%\$1,817\$663\$1,154\$121,192
1586.500%0.000%\$1,817\$656\$1,160\$120,031
1596.500%0.000%\$1,817\$650\$1,167\$118,865
1606.500%0.000%\$1,817\$644\$1,173\$117,692
1616.500%0.000%\$1,817\$638\$1,179\$116,513
1626.500%0.000%\$1,817\$631\$1,186\$115,327
1636.500%0.000%\$1,817\$625\$1,192\$114,135
1646.500%0.000%\$1,817\$618\$1,199\$112,936
1656.500%0.000%\$1,817\$612\$1,205\$111,731
1666.500%0.000%\$1,817\$605\$1,212\$110,520
1676.500%0.000%\$1,817\$599\$1,218\$109,302
1686.500%0.000%\$1,817\$592\$1,225\$108,077
Year 14  \$21,801\$7,532\$14,269
1696.500%0.000%\$1,817\$585\$1,231\$106,846
1706.500%0.000%\$1,817\$579\$1,238\$105,608
1716.500%0.000%\$1,817\$572\$1,245\$104,363
1726.500%0.000%\$1,817\$565\$1,251\$103,111
1736.500%0.000%\$1,817\$559\$1,258\$101,853
1746.500%0.000%\$1,817\$552\$1,265\$100,588
1756.500%0.000%\$1,817\$545\$1,272\$99,316
1766.500%0.000%\$1,817\$538\$1,279\$98,037
1776.500%0.000%\$1,817\$531\$1,286\$96,752
1786.500%0.000%\$1,817\$524\$1,293\$95,459
1796.500%0.000%\$1,817\$517\$1,300\$94,159
1806.500%0.000%\$1,817\$510\$1,307\$92,852
Year 15  \$21,801\$6,577\$15,224
1816.500%0.000%\$1,817\$503\$1,314\$91,539
1826.500%0.000%\$1,817\$496\$1,321\$90,218
1836.500%0.000%\$1,817\$489\$1,328\$88,890
1846.500%0.000%\$1,817\$481\$1,335\$87,554
1856.500%0.000%\$1,817\$474\$1,343\$86,212
1866.500%0.000%\$1,817\$467\$1,350\$84,862
1876.500%0.000%\$1,817\$460\$1,357\$83,505
1886.500%0.000%\$1,817\$452\$1,364\$82,140
1896.500%0.000%\$1,817\$445\$1,372\$80,769
1906.500%0.000%\$1,817\$438\$1,379\$79,389
1916.500%0.000%\$1,817\$430\$1,387\$78,003
1926.500%0.000%\$1,817\$423\$1,394\$76,608
Year 16  \$21,801\$5,557\$16,244
1936.500%0.000%\$1,817\$415\$1,402\$75,207
1946.500%0.000%\$1,817\$407\$1,409\$73,797
1956.500%0.000%\$1,817\$400\$1,417\$72,380
1966.500%0.000%\$1,817\$392\$1,425\$70,955
1976.500%0.000%\$1,817\$384\$1,432\$69,523
1986.500%0.000%\$1,817\$377\$1,440\$68,083
1996.500%0.000%\$1,817\$369\$1,448\$66,635
2006.500%0.000%\$1,817\$361\$1,456\$65,179
2016.500%0.000%\$1,817\$353\$1,464\$63,715
2026.500%0.000%\$1,817\$345\$1,472\$62,244
2036.500%0.000%\$1,817\$337\$1,480\$60,764
2046.500%0.000%\$1,817\$329\$1,488\$59,276
Year 17  \$21,801\$4,469\$17,332
2056.500%0.000%\$1,817\$321\$1,496\$57,781
2066.500%0.000%\$1,817\$313\$1,504\$56,277
2076.500%0.000%\$1,817\$305\$1,512\$54,765
2086.500%0.000%\$1,817\$297\$1,520\$53,245
2096.500%0.000%\$1,817\$288\$1,528\$51,716
2106.500%0.000%\$1,817\$280\$1,537\$50,180
2116.500%0.000%\$1,817\$272\$1,545\$48,635
2126.500%0.000%\$1,817\$263\$1,553\$47,081
2136.500%0.000%\$1,817\$255\$1,562\$45,520
2146.500%0.000%\$1,817\$247\$1,570\$43,950
2156.500%0.000%\$1,817\$238\$1,579\$42,371
2166.500%0.000%\$1,817\$230\$1,587\$40,784
Year 18  \$21,801\$3,308\$18,493
2176.500%0.000%\$1,817\$221\$1,596\$39,188
2186.500%0.000%\$1,817\$212\$1,604\$37,583
2196.500%0.000%\$1,817\$204\$1,613\$35,970
2206.500%0.000%\$1,817\$195\$1,622\$34,348
2216.500%0.000%\$1,817\$186\$1,631\$32,717
2226.500%0.000%\$1,817\$177\$1,640\$31,078
2236.500%0.000%\$1,817\$168\$1,648\$29,429
2246.500%0.000%\$1,817\$159\$1,657\$27,772
2256.500%0.000%\$1,817\$150\$1,666\$26,106
2266.500%0.000%\$1,817\$141\$1,675\$24,430
2276.500%0.000%\$1,817\$132\$1,684\$22,746
2286.500%0.000%\$1,817\$123\$1,694\$21,052
Year 19  \$21,801\$2,070\$19,731
2296.500%0.000%\$1,817\$114\$1,703\$19,350
2306.500%0.000%\$1,817\$105\$1,712\$17,638
2316.500%0.000%\$1,817\$96\$1,721\$15,916
2326.500%0.000%\$1,817\$86\$1,731\$14,186
2336.500%0.000%\$1,817\$77\$1,740\$12,446
2346.500%0.000%\$1,817\$67\$1,749\$10,697
2356.500%0.000%\$1,817\$58\$1,759\$8,938
2366.500%0.000%\$1,817\$48\$1,768\$7,169
2376.500%0.000%\$1,817\$39\$1,778\$5,391
2386.500%0.000%\$1,817\$29\$1,788\$3,604
2396.500%0.000%\$1,817\$20\$1,797\$1,807
2406.500%0.000%\$1,816\$10\$1,807\$0
Year 20  \$21,801\$749\$21,052
Grand
Total
\$322,012 \$162,012 \$160,000

## Mortgage Calculator - Help

Amortization Schedule
The amortization schedule show you how monthly principal and interest payment and principal balances change over the life of your loan.
Floor Rate
Floor rate is the minimum interest rate for an adjustable rate mortgage (ARM).
Index Rate
Rate Adjustment on ARMs are based on the index rate, the margin, the adjustment schedule, interest rate caps, and floor rate specified in your loan documents. Index rates change over time. They should be published and widely available. Common indexes used for setting mortgage rates have include the Prime Rate, Libor (London Interbank Offer Rate) and U.S. Treasury Rates.
Interest
The portion of your mortgage payment that is due to the interest rate being applied to the principal balance. The Total Interest for a mortgage is the sum of all interest paid over the life of a loan.
Interest Only
Interest-only mortgages allow borrowers to make interest-only payments for a specific period of time. Required mortgage payments can be significantly lower during the interest-only period since the borrower is not required to pay down the principal balance during that time. However, the borrower is taking on more risk since the balance is not being paid down. Interest-Only Mortgages come in a wide variety of types, including both fixed and adjustable rate mortgages.
The interest rate changes on an adjustable rate mortage (ARM) during adjustment periods specified in your loan documents. Your interest rate may have a fixed period where it does not change followed by adjustements on a regularly scheduled basis. For example, the interest rate on a mortgage could be fixed for 2 years followed by adjustments every 6 months.
Interest Rate Caps
Limits how much your interest rate can be increased during each adjustment period for an ARM. The cap for the first adjustment period may be different than the cap on subsequent adjustments. There also may be a maximim overall cap on interest rate increases during the life of your loan.
Interest Rate Scenarios
To decide if an adjustable rate mortgage is right for you, you should how changes in interest rates will effect the mortgage. The adjustable rate mortgage calculator shows you how your payment changes in the best case where rates are set at the minimum for your mortgage, the worst case where rates are set at the maximum for your mortgage, and the stable case where rates remain constant for your mortgage.
Loan Amount
The initial principal balance or your mortgage at closing.
Margin
When an ARM adjusts the margin is added to the index rate to help determine your interest rate. Interest rate caps and the floor rate for your mortgage may limit how much your actual interest rate changes. The margin typically is fixed for the life of the loan. It should be clearly specified in your loan documents.
Payment Shock
Occurs when the required minimum payment for a mortgage increases significantly. This can occur on adjustable rate mortgage when interest rates rise sharply, on interest-only mortgages when the interest-only period ends, and on balloon mortgages when the balloon payment is due.
Principal
The portion of your mortgage payment that is used to pay down the current balance of your mortgage. The principal balance represents how much you owe on the mortgage.
Start Rate
The initial interest rate on an Adjustable Rate Mortgage.
Term
The amortization term is one of the key factors that determine your required mortgage payment. Your required mortgage payment for fully amortizing mortgages is the amount that would result in the mortgage being closest to being paid off by the end of the amortization term. Longer amortization terms result in lower required mortgage payments for fully amortizating mortgages, all other things being equal.