About the Interest-Only Mortgage Calculator
This interest-only mortgage calculator shows both phases of an interest-only (IO) home loan. During the IO period you pay only the interest, so the balance does not fall. When that period ends, the full balance must be repaid over the remaining years, so the payment jumps — by about 35% in the default example below (10 years interest-only on a 30-year loan).
Enter the loan amount, rate, full term and length of the interest-only period to see both payments, the size of the jump, total interest and how the loan compares with a standard fully amortizing mortgage over the same term. It suits buyers considering an IO jumbo loan, investors focused on cash flow, and borrowers expecting a large income increase or a sale before the IO period ends.
The calculator assumes a fixed rate for the whole term. Many interest-only loans are adjustable-rate, so the payment after the IO period could also change with the index.
With the default inputs, the interest-only payment is $2,250.00. Change any value above to recalculate instantly.
How to use the interest-only mortgage calculator
- 1Enter the loan amount and interest rate.
- 2Choose the full loan term.
- 3Enter the length of the interest-only period (commonly 5, 7 or 10 years).
- 4Compare the IO payment with the payment after the period ends.
- 5Check the extra interest versus a standard mortgage before deciding.
Formula and method
During the interest-only period of k years, each payment is the loan balance P times the monthly rate r (annual rate ÷ 12), so the balance stays at P. After that, the entire balance is amortized over the remaining m months of the N-year term using the standard mortgage payment formula.
Total interest is the IO payments over k × 12 months plus the amortizing payments over m months, minus the principal. It is compared with a standard loan amortized over all N years at the same rate.
- P
- Loan amount
- r
- Monthly interest rate
- N
- Total term in years
- k
- Interest-only period in years
- m
- Months left to amortize after the IO period
Worked examples
$400k at 6.75%, 10 years interest-only
Interest-only payments are $400,000 × 6.75% ÷ 12 = $2,250. After 10 years the full $400,000 is repaid over 20 years at $3,041.46 a month, a $791 jump. Total interest is about $599,949, roughly $65,968 more than a standard 30-year loan paying $2,594.39.
$600k at 7%, 5-year IO
The IO payment is $3,500. After five years the balance amortizes over 25 years at $4,240.68. The shorter IO period means a smaller jump and about $45,149 of extra interest versus a standard loan.
$250k at 6.25%, 7-year IO
Paying interest only costs $1,302.08 a month for seven years, then $1,709.69 for 23 years. Total interest comes to about $331,249.
Frequently asked questions
How is an interest-only payment calculated?+
Multiply the loan balance by the annual interest rate and divide by 12. A $400,000 loan at 6.75% has an interest-only payment of $2,250 a month.
What happens when the interest-only period ends?+
The loan starts amortizing: you repay the full principal over the remaining term, so the payment rises sharply. On adjustable-rate IO loans the rate may also reset at the same time.
Does an interest-only mortgage cost more?+
Yes, over the full term. Because the balance does not fall during the IO years, you pay interest on the full amount for longer, so total interest is higher than on a standard loan at the same rate.
Can I pay principal during the interest-only period?+
Most interest-only loans allow extra principal payments. Paying down the balance lowers the interest-only payment and the later amortizing payment.
Who should consider an interest-only mortgage?+
They mainly suit borrowers with irregular or rising income, investors who value cash flow, or people who expect to sell or refinance before the IO period ends and can handle the risk if prices fall.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.