Interest Only Calculator
Estimate your lower starting payment, compare it with the future repayment jump, and understand your real long-term cost.
Loan Terms
Years before principal repayment starts.
Pay extra during the IO period to reduce the future jump.
Include Taxes, Insurance, HOA
The Payment Shift
Compare your lower starting payment with the higher repayment phase. Make sure you plan for the jump.
Years 1 to 10
Interest Only
Years 11 to 30
Principal + Interest
In Year 11, your minimum required payment will increase drastically because you must pay down the remaining principal in only 20 years. Consider making extra principal payments now to soften the jump later.
Lower Now, Higher Later
An interest-only mortgage can offer a lower starting payment because you pay only the interest for a set period.
This calculator helps you estimate the interest-only payment, compare it with a regular mortgage payment, and understand what may happen when principal payments begin.
Interest-Only Payment
During the interest-only period, your payment does not reduce the loan balance.
You are paying the cost of borrowing, but the principal stays the same unless you make extra payments.
Key Inputs
For a useful estimate, enter:
- Loan amount
- Interest rate
- IO period
- Full loan term
- Property taxes
- Home insurance
- HOA fees
- Extra principal
Payment Shift
The biggest risk is the payment change after the interest-only period ends.
Once principal repayment starts, your monthly payment may rise significantly because the entire loan balance must be paid down over the remaining, shortened term.
Principal Risk
Interest-only payments do not build equity through loan reduction.
Your equity may grow only if the home value increases naturally, or if you choose to make extra principal payments during the interest-only phase.
Smart Uses
An interest-only mortgage may fit some buyers who:
- Expect income to increase
- Need short-term cash flow
- Plan to sell before repayment begins
- Want flexibility for investments
- Have strong reserves & low debt risk
It should not be used only to make an unaffordable home look affordable.
Compare Both Payments
Use the calculator to compare:
- Interest-only payment
- Full principal and interest payment
- Payment after interest-only period
- Total interest cost
- Extra principal impact
- Long-term affordability
Quick Answers
What is an interest-only mortgage?
An interest-only mortgage allows you to pay only the interest portion of the loan for a set number of years (usually 5 to 10). Because you are not paying down the principal balance, the initial monthly payments are significantly lower.
What happens when the interest-only period ends?
When the interest-only period ends, the loan converts to a standard amortizing loan. You must now pay both principal and interest, but you have less time to pay off the same balance, resulting in a sudden and significant increase in your monthly payment.
Do interest-only mortgages build equity?
Your minimum payments do not build equity. Your equity will only grow if your home's market value increases, or if you voluntarily choose to make extra principal payments during the interest-only period.
Why would someone choose an interest-only mortgage?
They are typically used by buyers who expect a large increase in income later, who earn commission-based or seasonal income, or who plan to sell the home or refinance before the interest-only period expires.