What interest only means
On an interest only loan you pay only the interest each month, so the balance never falls. The monthly payment is the loan multiplied by the yearly rate and divided by 12. On £30,000 at 8% that is £200.00 a month, for example.
At the end you still owe the whole loan: £30,000.00. Over 10 years the interest comes to £24,000.00. A repayment loan on the same terms costs £363.98 a month but pays the balance off, and the interest only loan costs £10,322.07 more in interest over the term, because the balance stays high.
Fees make the lump sum bigger
Broker and lender fees are usually added to the loan, so the interest and the lump sum are charged on the larger amount. A £3,000 broker fee and a £595 lender fee make the loan £33,595.00. The interest only payment is then £223.97 a month, the total charge for credit is £30,471.00 and the APRC is 10.11%. The broker fee has no default: enter the amount from your quote.
Interest only first, then repayments
You can pay interest only for part of the term. Interest only for the first three years of a 10 year loan costs £200.00 a month. After that, repaying the whole balance over the remaining seven years costs £467.59 a month, and the total interest is £16,477.26.
To see a normal repayment loan with a budget and other terms, use the secured loan calculator.
Plan for the end of the term
The lump sum has to come from somewhere: a sale, a remortgage or savings. If the property value falls, the loan may be harder to repay. Your home may be repossessed if you do not keep up repayments on a loan secured on it. The FCA has published findings on second charge mortgages and the fees brokers charge.
For the US product, open the US interest only secured loan calculator.
Combined loan to value
With a £300,000 home, a £150,000 mortgage and a £30,000 loan, the combined loan to value is 60%. It is based on the new loan, not the fees.
Inputs for the interest only secured loan calculator
Amount to borrow
The loan you receive, before any fees added to it.
Loan term
How long the whole loan runs, including the interest only period.
Interest-only period
How long you pay only interest. Make it the full term to repay everything in one lump.
Interest rate
The yearly rate on your offer, charged monthly at one twelfth. The 8% shown is only an example.
Broker fee
The fee your broker quotes in pounds. It has no default: enter the amount from your quote, or zero.
Lender fee
The lender's product or arrangement fee in pounds.
Exit fee
A fee paid when the loan ends, if your offer has one.
Fees are
Whether fees are added to the loan, deducted from it or paid in cash.
Property value
What your home is worth, used for the combined loan to value.
Mortgage balance
What you still owe on your first mortgage.
CALCULATOR QUESTIONS
UK interest only secured loan calculator questions
How is interest only calculated on a secured loan?
The loan multiplied by the yearly rate, divided by 12. On £30,000 at 8% it is £200.00 a month.
What do I owe at the end?
The whole loan, including any fees added to it: £30,000.00 on the example with no fees. Fees added to the loan make it larger.
Does interest only cost more?
Over the whole term, yes: £10,322.07 more on the example, because the balance is never paid down.
Can I pay interest only for part of the term?
Yes. Set the interest only period shorter than the term and the calculator shows the payment that follows.
Are fees included?
Yes. Broker, lender and exit fees feed the total charge for credit and the APRC.
Can I lose my home?
Yes. Your home may be repossessed if you do not keep up repayments on a loan secured on it.