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Interest-Only Mortgage Calculator

Estimate the interest-only payment on a mortgage, how much the payment jumps when principal repayments start, and the extra interest compared with a standard loan.

Results

ItemValue

Payments over the loan

PeriodMonthly paymentPaid in that period
This assumes a fixed rate. Many interest-only loans have adjustable rates, so the later payment could be higher or lower. Taxes, insurance and mortgage insurance are not included.

Quick Answer

On an interest-only mortgage, the monthly payment is the loan × the annual rate ÷ 12. A $400,000 loan at 6.5% costs $2,166.67 a month for the first 10 years. After that, the full balance is repaid over the remaining 20 years, so the payment rises to $2,982.29.

Last updated: 3 November 2026 ·How we calculate this: interest-only and standard amortization formulas

How This Interest-Only Mortgage Calculator Works

Enter the loan amount, the interest rate, the total term and the length of the interest-only period. The calculator finds the payment while you pay only interest, then the higher payment when you start repaying the loan over the years that are left. It compares both with a standard loan of the same size and term, so you can see the true cost.

Quick explanation: during the interest-only years your balance does not go down at all.

  • Interest-only payment: loan × rate ÷ 12.
  • Later payment: the full loan repaid over a shorter time, so it jumps.
  • Total cost: more interest than a standard mortgage.

How to Use the Interest-Only Mortgage Calculator

  1. Enter the loan amount and interest rate.
  2. Choose the total loan term.
  3. Choose how many years are interest only.
  4. Press Calculate.
  5. Compare the interest-only payment, the later payment and the extra interest.

Core Formulas

  • Interest-only payment: L × annual rate ÷ 12
  • Payment after: L × r ÷ (1 − (1 + r)^−n), where n = (term − interest-only years) × 12
  • Total interest: interest-only payments + later payments − L
  • Standard payment: the same formula with n = full term × 12

r is the monthly rate, the annual rate ÷ 12, written as a decimal.

Key Terms

  • Interest-only period: the years when you pay only interest, not principal.
  • Principal: the amount you borrowed and still owe.
  • Amortization: paying off a loan with regular payments of principal and interest.
  • Payment shock: a large rise in the monthly payment.
  • Fixed rate: an interest rate that stays the same for the whole loan.

Worked Example

You borrow $250,000 at 7% for 30 years, with the first 5 years interest only.

  • Interest-only payment = $250,000 × 7% ÷ 12 = $1,458.33
  • From year 6, the $250,000 is repaid over 25 years: $1,766.95 a month
  • A standard 30-year loan would be $1,663.26 a month
  • Extra interest from the interest-only years: $18,812.15

Real-Life Examples

  • Budget check: a $400,000 loan at 6.5% jumps from $2,166.67 to $2,982.29 after 10 years.
  • True cost: the same loan costs $65,572.26 more in interest than a standard 30-year loan.
  • Shorter IO period: 5 years of interest only on $250,000 at 7% means $1,458.33 then $1,766.95.
  • Rental plans: compare the interest-only payment with expected rent.

Interest-Only vs Standard Mortgage

  • Interest-only: lower early payments, no principal paid, higher later payments and more total interest.
  • Standard: the same payment for the whole term, and the balance falls from the first month.
  • Balloon loan: another option where a large lump sum is due at the end instead of a payment jump.

Interest-Only Payment per $100,000

RateInterest onlyAfter 10 years (20 left)Standard 30-year
5%$416.67$659.96$536.82
5.5%$458.33$687.89$567.79
6%$500.00$716.43$599.55
6.5%$541.67$745.57$632.07
7%$583.33$775.30$665.30
7.5%$625.00$805.59$699.21
8%$666.67$836.44$733.76

Risks to Know

  • Payment shock: the jump after the interest-only period can strain your budget.
  • No equity from payments: you only build equity if the home rises in value or you pay extra.
  • Falling prices: if values drop, you could owe more than the home is worth.
  • Adjustable rates: many interest-only loans can change rate, adding more uncertainty.

Who Uses Interest-Only Loans

Interest-only mortgages suit a small group of borrowers with a clear plan. Some expect their income to rise sharply, some get large bonuses or commissions and pay down the loan in lump sums, and some investors want the lowest payment on a rental while they hold it for a few years.

For most home buyers, a standard mortgage is safer. If you choose interest-only, make extra principal payments when you can, keep savings for the higher payment, and know exactly when the interest-only period ends. Check the loan documents for whether the rate is fixed or adjustable.

Common Mistakes to Avoid

  • Budgeting only for the low payment. Plan for the higher payment from day one.
  • Expecting equity to grow. Interest-only payments do not reduce the balance.
  • Ignoring rate changes. An adjustable rate can raise the payment further.
  • Relying on refinancing. Rates or home values may not allow it when the time comes.
  • Forgetting taxes and insurance. They come on top of the payments shown.

Frequently Asked Questions

Multiply the loan by the annual rate and divide by 12.

You start repaying the principal over the years left, so the payment goes up.

No. Only rising home values or extra payments build equity during that time.

Yes. You pay interest on the full balance for longer, so total interest is higher.

Often 5 to 10 years, but terms vary.

Usually yes. Extra payments reduce the balance and the later payment.

Many are. This calculator assumes a fixed rate.

Fewer lenders than standard mortgages. Ask banks and mortgage brokers what they offer.

Yes, unless you made extra payments.

Possibly, but it depends on rates, your credit and the home's value at that time.

No. Add them to see your full monthly cost.

Some investors use it for lower payments, but it carries more risk.

References & Sources

SourceUsed ForLink
Consumer Financial Protection Bureau, Why did my mortgage payment go up? Payments rise once principal repayment starts on an interest-only loan. https://www.consumerfinance.gov/ask-cfpb/why-did-my-monthly-mortgage-payment-go-up-or-change-en-213/
Consumer Financial Protection Bureau, What is an interest-only loan? How interest-only loans work and why later payments are higher. https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-101/