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If you take out an interest only loan and then make additional payments, you might be able to save yourself some money over the long haul. If you take out a 30 year loan for $250,000.00 with a 5.875% interest rate, for example, the monthly payment would be about $1,223.96. This means you will pay $440,625.00 in interest at the end of the loan term. If you pay an extra $50.00 per month, however, your average monthly payment will not be much more, only $1,230.02. At the end of the loan period, you will have paid $424,806.56 in interest. Since your extra payment will get your interest paid off sooner, you will save $15,818.44 in interest by paying an extra $50.00 each month. This will reduce the balance of your $250,000.00 loan to $232,000.00, which will result in $18,000.00 in loan appreciation.
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