What does Interest-Only Mortgage Calculator do?
Interest-only mortgage calculator. See the payment during the interest-only period, the jump when it ends, and the extra interest versus a standard US loan.
- 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
- United States (USD)
- Category
- Financial Calculators
How to use the interest-only mortgage calculator
- Enter the loan amount and interest rate.
- Choose the total term and the length of the interest-only period.
- Read the interest-only payment and the payment once principal repayment starts.
- Compare the total interest and balance with a standard loan over the same term.
Worked example
$400,000 at 6.5% for 30 years with 10 years interest-only
The interest-only payment is $2,166.67 a month. After 10 years the full $400,000 is still owed and must be repaid over 20 years, so the payment rises to $2,982.29, an increase of $815.62 (37.6%). Total interest is $575,751.15 against $510,179.81 on a standard 30-year loan ($2,528.27 a month), or $65,571.34 more.
How it works
Interest-only payment = loan × rate ÷ 12. After the interest-only period the payment is M = P × r / (1 − (1 + r)−n) with n = remaining months. Payment shock = amortizing payment − interest-only payment. The standard loan amortizes the same amount over the full term. Interest is rounded to the cent each month.
Assumptions
- The rate is fixed for the whole loan. Many interest-only loans are adjustable; use the ARM calculator to test rate changes.
- No extra principal is paid during the interest-only period.
- The loan amortizes over the remaining term after the interest-only period, rather than ending with a balloon payment.
Frequently asked questions
Why does the payment jump after the interest-only period?
You still owe the whole balance but now have fewer years to repay it, so each payment must include principal as well as interest.
Does interest-only cost more overall?
Yes, at the same rate and term, because the balance stays at its highest for longer, so more interest is charged.
Can I pay principal during the interest-only period?
Many loans allow it. Any principal you pay lowers the balance and the later payment.
Limitations
- Principal and interest only; taxes and insurance are not included.
- Does not model balloon loans or rate changes.