The interest only loan differs from the standard loan or mortgage in that extra payments will decrease the monthly amount paid as well as the lifetime of the loan. With a standard mortgage, added payments decrease the life of the loan but the monthly payments remain the same. The interest only loan is a benefit to people who do not currently have the money to make large monthly payments but may be able to make sporadic large monthly payments.

Monthly payments on the interest only loan

The basic difference between the interest only loan and the standard home loan is the manner in which the monthly payments are calculated. When you accept a standard home mortgage, you agree to pay a certain amount each month until the loan is paid off. For example, you will pay five hundred dollars every month for your mortgage and that will not change until the very last payment when the entire mortgage has been repaid.

With the interest only loan, you are paying an interest percent which is calculated each month based on what is still owed on the loan. Let