🏠 Interest-Only Mortgage Calculator
Enter the loan, rate, total term and interest-only period to see the low payment now, the higher payment later and how much more interest the loan costs overall.
Quick answer: Interest-only payment = loan × annual rate ÷ 12. A $300,000 loan at 6.5% costs $1,625.00 a month; after a 10-year interest-only period on a 30-year term, the payment rises to $2,236.72.
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Interest-Only Mortgage Calculator inputs
Result
Monthly payment for 10 years
$1,625.00
then $2,236.72 a month for the remaining 20 years
| Interest-only payment | $1,625.00 |
| Payment after interest-only period | $2,236.72 |
| Total interest over the loan | $431,812.80 |
| Total repaid | $731,812.80 |
- Principal repaid in IO period
- $0.00
- Standard repayment loan
- $1,896.20/mo
- Extra interest vs standard
- $49,180.80
How interest-only payments work
During the interest-only period you pay only the interest charged each month, so the balance does not fall. When the period ends, the full balance is amortised over the remaining years.
Interest-only = Loan × Rate ÷ 12 · Later payment = L × r ÷ (1 − (1 + r)−n)
Here r is the monthly rate and n the number of months left after the interest-only period.
Example: $300,000 at 6.5% with a 10-year interest-only period on a 30-year term. Interest-only: 300,000 × 0.065 ÷ 12 = $1,625.00. After year 10, 240 months remain, so the payment is $2,236.72. A standard 30-year loan would cost $1,896.20 a month from day one.
Pros and cons
- Lower early payments free up cash flow, useful for investors or rising incomes.
- No equity from repayments – you only build equity if the property rises in value.
- Payment shock when repayment starts, and more total interest than a standard loan.
- Lenders often require a larger deposit and stronger credit for these loans.
This is an estimate for planning, not financial advice. Check the exact terms with your lender.
Frequently asked questions
Do I pay down the balance on an interest-only mortgage?
Not during the interest-only period. The balance stays the same, so you still owe the full amount when repayments begin.
Why does the payment jump after the interest-only period?
The same balance must now be repaid over fewer years, so each payment includes principal as well as interest. This calculator shows the new amount before you commit.
Is an interest-only mortgage cheaper overall?
No. Because the balance is not reduced early, you pay more interest in total than on a standard repayment loan with the same rate and term.
What happens if the rate changes?
This calculator assumes a fixed rate. With an adjustable rate both payments change when the rate resets, so re-run it with the new rate.
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