What does Interest-Only Home Loan Calculator do?
Interest-only home loan calculator for Australia: weekly, fortnightly or monthly repayments, the repayment jump when the period ends and extra interest.
- Price
- Free
- Account
- Not required
- Processing
- Entirely in your browser; your data and files are not uploaded
- Works on
- Any modern browser on desktop, tablet or phone
- Region
- Australia (AUD)
- Category
- Financial Calculators
How to use the interest-only home loan calculator (australia)
- Enter the loan amount and the full loan term.
- Choose the interest-only period and how often you repay.
- Enter the interest rate during the interest-only period and the rate that applies afterwards.
- Compare the interest-only repayment, the higher repayment that follows, the extra interest and the balance chart against a principal and interest loan.
Worked example
$600,000 over 30 years, 5 years interest only at 6.30%, then 6.00%
Interest-only repayments are $600,000 × 6.30% ÷ 12 = $3,150.00 a month. After 5 years the loan is repaid over the remaining 25 years at 6.00%, so repayments rise to $3,865.81, a jump of $715.81 (22.7%). A principal and interest loan at 6.00% from day one costs $3,597.30 a month, owes $558,326 after 5 years instead of $600,000, and saves $53,711 in interest. For Moneysmart’s scenario ($500,000 over 25 years at 4.8% with 5 years interest only) the calculator gives $2,000.00, then $3,244.79, against $2,864.98 for principal and interest; Moneysmart’s rounded figures are $2,010, $3,250 and $2,875.
How it works
Interest-only repayment = loan × interest-only rate ÷ repayments per year (12, 26 or 52); the balance does not fall. Afterwards the repayment is P × r ÷ (1 − (1 + r)−n) with r = rate after ÷ repayments per year and n = repayments left in the term. Interest each period is the balance × r, rounded to the cent. The comparison loan is principal and interest at the rate after, over the full term.
Assumptions
- Rates stay as entered. Lenders often charge a higher rate for interest-only loans, and variable rates change.
- Interest compounds once per repayment period; lenders usually calculate interest daily, so figures differ slightly.
- Fees and extra repayments are not included.
- At the end of the interest-only period the loan reverts to principal and interest over the remaining term, rather than being extended.
Frequently asked questions
Why do repayments jump after the interest-only period?
You still owe the whole amount, but now have fewer years to repay it. Moneysmart warns that repayments rise at the end of the interest-only period and can rise further if rates go up.
Does interest-only cost more overall?
Yes, for the same rate and term, because the balance stays high for longer. The calculator shows the extra interest compared with principal and interest from day one.
When might interest-only make sense?
Moneysmart lists short-term loans such as bridging or construction finance, freeing cash to pay off more expensive debts, and investors who may be able to claim higher tax deductions. The trade-off is that repayments build no equity during the period and the loan costs more overall.
Can I extend the interest-only period?
Sometimes, but it needs lender approval and a new assessment, and is not guaranteed. Plan to afford the principal and interest repayment.
Limitations
- An estimate, not a loan offer.
- Does not model daily interest, fees, offset accounts or rate changes.