Interest-only loans keep payments low at first, which can suit investors or people expecting a big income rise, but the balance doesn’t fall and payments jump when the IO period ends.
How to use the Interest-Only Mortgage Calculator
- Loan amount
- Annual interest rate
- Interest-only period
- Total term
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the loan amount, interest rate, interest-only period and total term.
Tips
- Get a written loan estimate and compare the APR, not just the interest rate.
- Include property tax, insurance, HOA fees and maintenance in your monthly budget.
- A larger down payment lowers the payment and can remove mortgage insurance.
- Rates change daily – use a current quote for the most accurate result.
Common mistakes to avoid
- Looking only at the monthly payment instead of the total cost of the loan.
- Forgetting closing costs and fees.
- Assuming home prices always rise.
Inputs explained
| Field | What to enter |
|---|---|
| Loan amount | Amount in your currency |
| Annual interest rate | In % |
| Interest-only period | Units: years, months |
| Total term | Units: years, months |
What each result means
- Interest-only monthly payment = [Loan amount]×[Annual interest rate]÷1200
- Monthly payment after the IO period = pmt([Annual interest rate]÷1200, [Total term] – [Interest-only period], [Loan amount])
- Payment increase = ([Monthly payment after the IO period]÷[Interest-only monthly payment] – 1)×100
- Total interest = [Interest-only monthly payment]×[Interest-only period] + [Monthly payment after the IO period]×([Total term] – [Interest-only period]) – [Loan amount]
- Total interest on a regular loan = pmt([Annual interest rate]÷1200, [Total term], [Loan amount])×[Total term] – [Loan amount]
- Extra interest from the IO period = [Total interest] – [Total interest on a regular loan]
Example values
How the main result changes when Loan amount changes and everything else stays at the example values above:
| Loan amount | Interest-only monthly payment |
|---|---|
| 175,000 | 947.92 |
| 262,500 | 1,421.88 |
| 350,000 | 1,895.83 |
| 437,500 | 2,369.79 |
| 525,000 | 2,843.75 |
| 700,000 | 3,791.67 |
Formula
Interest-only payment = loan × rate ÷ 12Later payment = pmt(rate ÷ 12, months remaining after the IO period, loan)Total interest = IO payments + amortizing payments − loanWorked example
Inputs — Loan amount: $350,000; Annual interest rate: 6.5 %; Interest-only period: 10 years; Total term: 30 years.
Results — Interest-only monthly payment = $1,895.83; Monthly payment after the IO period = $2,609.51; Payment increase = 37.64 %; Total interest = $503,781.43; Total interest on a regular loan = $446,405.71; Extra interest from the IO period = $57,375.72.
Frequently asked questions
What is an interest-only mortgage?
A loan where you pay only interest for an initial period.
What happens when the IO period ends?
Payments rise to repay the principal over the remaining term.
Who uses interest-only loans?
Mainly investors and high earners with variable income.
What formula does the Interest-Only Mortgage Calculator use?
Interest-only payment = loan × rate ÷ 12.