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Interest-Only Mortgage Calculator

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Enter your loan details to see your payment during the interest-only period, and how much it increases once principal payments begin.

Interest-Only Mortgage Calculator

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Payment during interest-only period$1,625.00/mo
Payment after IO period ends$2,236.72/mo
Payment increase+$611.72/mo (+37.6%)
During the interest-only period, none of your payment reduces the loan balance. This is informational only - interest-only loans carry real payment-shock risk and are not suitable for every borrower.

The formula

Interest-only payment = Loan amount x (Annual rate / 12) After the IO period, the payment recalculates as a standard amortizing payment over the REMAINING years, using the full original loan balance (since nothing was paid toward principal during the IO period)
Example

$300,000 loan at 6.5%, 10-year interest-only period on a 30-year term: payment during the IO period is $1,625/month. Once the IO period ends, the payment jumps to about $2,236.72/month - a 37.6% increase - since the full $300,000 balance now amortizes over the remaining 20 years.

Step-by-step guide

  1. Enter your loan amount and rate, exactly as quoted by your lender.
  2. Enter the interest-only period (commonly 5-10 years) and your total loan term.
  3. Compare the two payment amounts carefully - the jump when the IO period ends is the single most important number on this page.

Why the payment jump is often bigger than people expect

Because none of your payment reduces principal during the interest-only years, the FULL original loan balance still has to be paid off - just compressed into a shorter remaining period than a standard loan would use. A 30-year loan with a 10-year interest-only period doesn't spread principal repayment over 30 years like a normal mortgage; it spreads it over just the remaining 20 years, on the full original balance. This is why the post-IO payment is often meaningfully higher than what a standard amortizing loan of the same rate and term would have required from day one - you're paying off the same total principal in less time once the IO period ends.

Common mistakes

Budgeting only around the lower interest-only payment without planning for the increase - the jump when the IO period ends is often 30-50% or more, and can catch borrowers off guard if their income hasn't grown to match.
Assuming you're building equity through payments during the IO period - you're only building equity through home value appreciation, not through paying down the loan, since the balance doesn't decrease at all during that time.

Frequently asked questions

Can I pay extra toward principal during the interest-only period?

Usually yes - most interest-only loans allow optional extra principal payments during the IO period, which would reduce both your eventual balance and the size of the payment jump when full amortization begins.

Who typically uses interest-only mortgages?

Common uses include borrowers expecting significantly higher future income, those planning to sell or refinance before the IO period ends, and investors prioritizing cash flow over building equity in the short term.

Is an interest-only mortgage riskier than a standard mortgage?

It carries different risks - primarily payment shock when the IO period ends, and the risk of owing the full original balance if home values decline, since no equity was built through payments during that period.

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