Interest-Only Mortgage Calculator
Work out the interest-only payment, the higher payment once principal is due, the size of the jump and total interest versus a standard mortgage.
An interest-only mortgage lets you pay just the interest for the first few years, so early payments are lower but the balance does not shrink at all. When the interest-only period ends, the whole loan has to be repaid over the years that remain, and the monthly payment jumps. This calculator shows both payments, the size of the jump and the extra interest compared with a standard mortgage.
How to use this tool
- Enter the loan amount and the yearly interest rate.
- Choose how long the interest-only period lasts.
- Choose the total loan term.
- Compare the two payments and check the year-by-year balance table.
Formula
Interest-only payment = L × r · Later payment = L × r ÷ (1 − (1 + r)^−m)
L is the loan amount, r the monthly rate (yearly rate ÷ 12 ÷ 100) and m the months left after the interest-only period: (term − interest-only years) × 12. The balance stays at L until principal payments begin.
Example
A $400,000 loan at 6% with a 10-year interest-only period on a 30-year term costs 400,000 × 0.005 = $2,000 a month for the first 120 months. Then the full $400,000 must be repaid in 20 years, so the payment rises to $2,865.72, about 43% more. Total interest comes to about $527,774, against $463,353 for a standard 30-year loan paying $2,398.20 from day one.
Frequently asked questions
Who uses interest-only mortgages?
Mostly borrowers with uneven income such as bonuses or commissions, investors who plan to sell or refinance, and buyers who expect their income to rise. In the U.S., a loan with an interest-only period cannot be a Qualified Mortgage, so these loans are less common and often have stricter requirements.
Can I pay principal during the interest-only years?
Most loans allow it. Paying extra lowers the balance, which lowers both the remaining interest-only payments and the later payment. This calculator assumes you pay interest only.
Is the rate fixed?
Not always. Many interest-only loans are adjustable-rate mortgages, so the payment can also change at each rate reset. The figures here keep the same rate for the whole term.
What happens when the interest-only period ends?
Payments switch to principal plus interest over the remaining term. You can instead refinance or sell, but that depends on rates, your credit and the home's value at the time.
Sources
This tool gives an estimate for general information only. It is not financial, tax, legal or medical advice — check with a qualified professional before you rely on the result.
Last updated: 2026-10-30