How the reading works
Two payments, one structure
An interest-only loan has two payments, and both matter. For an initial period the payment covers interest only. When that period ends the loan amortizes: each payment then repays principal as well as interest over the remaining term, and the payment increases. The explorer works through both on figures you enter, and shows how the balance moves.
How the interest-only payment is worked out
Multiply the balance by the interest rate and divide by 12: that is one month's interest, and during the interest-only years it is the whole payment. The balance does not fall unless you choose to pay principal.
How the payment after is worked out
When the interest-only years end, the balance is repaid in equal payments of principal and interest over the years that remain. The payment increases when the balance begins to amortize, and the fewer years remain, the larger the increase.
Principal during the interest-only years
Principal reduction is elective, not scheduled. If you enter an amount you might pay each month, the explorer lowers the balance by it, works out the later payment on the lower balance, and draws the balance both ways. How your loan treats extra principal is set out in your loan documents.
Taxes, insurance and dues
Both payments are principal and interest only. Property taxes, homeowners insurance and any association dues are not included, so the actual payment will be higher.
The rate you type
Mbanc does not quote rates here. Type any rate you want to test: the explorer applies it monthly and holds it the same for the whole term. It is not the full cost of credit, which also reflects fees and charges, and it is not a rate Mbanc is offering you.
Whom it suits
Borrowers whose income arrives unevenly or in large sums, such as founders, partners and professionals paid on distributions; borrowers who prefer to reduce principal on their own schedule, for example after a liquidity event; and investors managing the cash flow of a rental.
It is not for everyone. The balance does not decline on its own during the interest-only period, and the later payment is higher. If you want the balance to fall steadily from the first payment, a fully amortizing structure may suit you better, and Mayer will say so.
What this explorer does not do
It does not say whether interest-only is available on your loan, for how long, or on what full term: whether interest-only is available, for how long, and the full term are set for each file. It does not compare interest-only with a fully amortizing loan, total the interest over the term, or show a cost of credit.
Your figures stay on this page. Nothing you type is sent to Mbanc, saved in your browser or added to the page address. Read the guide to interest-only jumbo loans.