Interest-Only Mortgage Calculator
Calculate your monthly payments for both interest-only and principal+interest periods
Payment Summary
Loan Timeline
Payment Breakdown
Payment breakdown chart will appear here
Amortization Schedule
Your amortization schedule summary will appear here after calculation.
The full amortization schedule will appear here after calculation.
Amortization chart will appear here
Disclaimer: This calculator provides estimates for informational purposes only. Results are based on the data you provide and should not be considered financial advice. Consult with a qualified financial advisor for personalized guidance.
Interest-Only Mortgage Calculator
An Interest-Only Mortgage Calculator helps you figure out exactly how much your monthly payment will be during the interest-only period of your loan. It also shows you how your payment changes when you start paying both principal and interest. With this tool, you can calculate payments, view the long-term cost of your mortgage, and generate an amortization schedule for better financial planning.
Planning your loan more precisely? Head to our Loan Calculators collection for additional resources, including mortgage payment breakdowns, amortization charts, and affordability guides.
What Is an Interest-Only Mortgage
An interest-only mortgage is a type of home loan where, for an initial period (usually 5–10 years), you only pay the interest on the loan balance. During this time:
- Monthly payments are lower because you’re not reducing the loan principal.
- The loan balance does not decrease during the interest-only phase.
- Once the interest-only period ends, payments increase because you start paying both principal + interest.
This mortgage structure can be useful for borrowers who need lower initial payments or expect future income growth, but it comes with higher long-term costs.
How the Interest-Only Mortgage Calculator Works
Our calculator uses four main inputs:
- Mortgage Amount – The loan size you’re borrowing (e.g., $300,000).
- Mortgage Term – The total length of the mortgage in years (e.g., 30 years).
- Interest Rate – The annual interest rate (e.g., 6%).
- Interest-Only Period – How long you’ll pay interest-only (e.g., 10 years).
Based on these inputs, the calculator gives you:
- Monthly interest-only payment during the interest-only period.
- Principal + interest payment after the interest-only phase ends.
- A detailed amortization schedule showing payment breakdown over time.
Interest-Only Mortgage Payment Formula
To understand the math, here are the plain-text formulas:
Interest-Only Payment:
Payment = (Loan Amount × Interest Rate) / 12
Principal + Interest Payment (after interest-only period):
Payment = Loan Amount × [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]
where:
r = monthly interest rate (annual rate ÷ 12)
n = number of remaining months
Example: $300,000 Interest-Only Mortgage
Let’s say you borrow $300,000, with:
- 30-year mortgage term
- 6% interest rate
- 10 years interest-only
You can contrast this with a full Mortgage Calculator to understand the difference in payment structures.
Use the Amortization Schedule Calculator to visualize how payments build equity over time.
Step 1: Interest-Only Payment
Payment = (300,000 × 0.06) / 12
Payment = $1,500
So for 10 years, you pay $1,500 per month.
Step 2: Principal + Interest Payment (after 10 years)
Remaining term = 20 years = 240 months.
r = 0.06 / 12 = 0.005
n = 240
Payment = 300,000 × [0.005(1 + 0.005)^240] / [(1 + 0.005)^240 – 1]
Payment ≈ $2,149
So after year 10, your payment jumps to about $2,149 per month.
Amortization Schedule for Interest-Only Mortgage
Here’s a simplified amortization schedule for the example above:
| Year | Payment Type | Monthly Payment | Principal Paid | Interest Paid | Remaining Balance |
|---|---|---|---|---|---|
| 1–10 | Interest Only | $1,500 | $0 | $1,500 | $300,000 |
| 11 | Principal + Interest Begins | $2,149 | $649 | $1,500 | $299,351 |
| 12 | Principal + Interest | $2,149 | $652 | $1,497 | $298,699 |
| … | … | … | … | … | … |
| 30 | Final Payment | $2,149 | $2,138 | $11 | $0 |
This table shows how payments remain flat in the beginning but then increase sharply after the interest-only phase.
Pros and Cons of Interest-Only Mortgages
Advantages
- Lower initial payments: Easier to qualify for a larger loan.
- Flexibility: Useful for short-term ownership or expected income growth.
- Investment opportunities: Cash saved can be invested elsewhere.
Disadvantages
- No equity built during the interest-only phase.
- Payment shock after interest-only ends.
- Higher long-term cost compared to traditional mortgages.
Who Should Use an Interest-Only Mortgage Calculator?
This tool is most helpful for:
- First-time homebuyers comparing loan options.
- Investors considering short-term property holding.
- Borrowers with variable income expecting higher future earnings.
- Homeowners refinancing to lower initial payments.
Comparison: Interest-Only vs Traditional Mortgage
| Feature | Interest-Only Mortgage | Traditional Mortgage |
| Initial Monthly Payment | Lower | Higher |
| Equity Growth (early) | None | Gradual |
| Payment After IO Period | Much Higher | Consistent |
| Best For | Short-term buyers, investors | Long-term homeowners |
FAQs About Interest-Only Mortgage Calculator
1. How long can an interest-only period last?
Usually between 5–10 years, depending on lender terms.
2. Can I pay extra toward principal during the interest-only phase?
Yes, most lenders allow additional principal payments even if not required.
3. What happens if I sell during the interest-only period?
You’ll still owe the full loan balance since no principal has been paid down.
4. Is an interest-only mortgage risky?
Yes, because you’re not building equity and payments increase later.
Try the Interest-Only Mortgage Calculator Now
Use our Interest-Only Mortgage Calculator to test different loan amounts, interest rates, and terms. Instantly see:
- Your monthly payment during the interest-only phase
- The payment jump after it ends
- A full amortization schedule
This way, you can plan ahead and make the right financial decision for your home loan.
An Interest-Only Mortgage Calculator is an essential tool for anyone considering this type of loan. It helps you see the short-term benefits and long-term costs clearly. While interest-only mortgages provide flexibility and lower initial payments, they also come with financial risks. Always compare options, run scenarios with the calculator, and consult with a mortgage advisor before making a decision.