Forbearance Interest Capitalization Calculator

Deferred interest during forbearance capitalizes into principal — projects resulting balance growth.

Starting principal

Interest rate %

Forbearance months

Monthly principal deferred

New capitalized balance

$323,303

Interest + principal capitalized

$23,303

Balance growth

0.08%

How the math works

Balance grows monthly by accrued interest. Add deferred principal at end.

$300k at 6% for 12 mo compound → $318,462 + $4,800 deferred principal = $323,262 new balance.

How to Use

Enter starting principal.
Enter interest rate %.
Enter forbearance months.
Enter monthly principal payment deferred (optional).
Read capitalized balance.

Frequently Asked Questions

What gets capitalized?

During forbearance, unpaid interest accrues and may capitalize onto principal balance at end of forbearance period. Some programs cap interest only (principal still amortizing). Others defer both. Post-forbearance: new principal = old principal + capitalized interest. Amortization restarts on higher balance unless loan mod re-amortizes over remaining term.

How does compounding work?

Capitalized interest itself earns interest. 6% rate, 12 months: $300k × 6% × 12mo = $18k interest if fully capitalized (simple). With monthly compounding on growing balance: $300k × (1.005^12 − 1) = $18,459 (slightly higher). For accurate projection use compound formula. Impact compounds over loan life — $18k capitalized at 6% over 25 years = $24k of added interest cost.

Alternative to capitalization?

Deferment: interest accrues but sits in separate non-interest-bearing bucket, payable at loan maturity/sale/refinance (COVID partial claim). Repayment plan: pay back over 6-36 months in addition to regular payments. Loan modification: re-amortize capitalized balance over extended term. Each has different impact on monthly payment, total interest, and credit. Borrowers should model all options.

Tax treatment?

Capitalized mortgage interest on primary residence: deductible up to TCJA limits ($750k acquisition debt). Capitalized investment property interest: deductible as passive loss. Borrowers should consult tax advisor — capitalized interest increasing basis may create complex basis adjustments. Student loans: capitalized interest non-deductible (student loan interest limited to $2,500/year).