Interest-Only Mortgage Calculator
Calculate your interest-only mortgage payment and see exactly how much your payment will jump when full amortization begins. Compare the total cost of an interest-only loan against a standard amortizing mortgage.
Interest-Only Calculator Inputs
Enter Loan Details
Your Interest-Only Results
Interest-Only (Years 1-10)
- Monthly payment during interest-only period
- $1,733.33 /mo
Interest only — no principal reduction
Amortizing (Years 11-30)
- Monthly payment after amortization begins
- $2,385.83 /mo
+$652.50 (37.6% increase)
- Payment Jump
- +$652.50 (+37.6%)
- Standard Payment
- $2,022.62/mo
- IO Total Interest
- $460,598.80
- Extra Interest Cost
- +$52,455.60
Interest-Only vs Standard Amortization
| Interest-Only | Standard 30-Year | Difference | |
|---|---|---|---|
| Initial Monthly Payment | $1,733.33 | $2,022.62 | $-289.29 |
| Payment After IO Period | $2,385.83 | $2,022.62 | +$363.21 |
| Interest During IO Period | $207,999.60 | — | — |
| Interest During Amortizing Period | $252,599.20 | — | — |
| Total Interest Paid | $460,598.80 | $408,143.20 | +$52,455.60 |
| Total Cost of Loan | $780,598.80 | $728,143.20 | +$52,455.60 |
Amortization Schedule
| Year | Phase | Principal Paid | Interest Paid | Remaining Balance |
|---|---|---|---|---|
| 1 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 2 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 3 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 4 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 5 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 6 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 7 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 8 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 9 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 10 | IO | $0.00 | $20,799.96 | $320,000.00 |
| 11 | Amort starts | $8,067.47 | $20,562.49 | $311,932.53 |
| 12 | Amort | $8,607.80 | $20,022.16 | $303,324.73 |
| 13 | Amort | $9,184.27 | $19,445.69 | $294,140.46 |
| 14 | Amort | $9,799.34 | $18,830.62 | $284,341.12 |
| 15 | Amort | $10,455.64 | $18,174.32 | $273,885.48 |
| 16 | Amort | $11,155.87 | $17,474.09 | $262,729.61 |
| 17 | Amort | $11,903.00 | $16,726.96 | $250,826.61 |
| 18 | Amort | $12,700.15 | $15,929.81 | $238,126.46 |
| 19 | Amort | $13,550.70 | $15,079.26 | $224,575.76 |
| 20 | Amort | $14,458.22 | $14,171.74 | $210,117.54 |
| 21 | Amort | $15,426.53 | $13,203.43 | $194,691.01 |
| 22 | Amort | $16,459.66 | $12,170.30 | $178,231.35 |
| 23 | Amort | $17,561.99 | $11,067.97 | $160,669.36 |
| 24 | Amort | $18,738.15 | $9,891.81 | $141,931.21 |
| 25 | Amort | $19,993.10 | $8,636.86 | $121,938.11 |
| 26 | Amort | $21,332.06 | $7,297.90 | $100,606.05 |
| 27 | Amort | $22,760.72 | $5,869.24 | $77,845.33 |
| 28 | Amort | $24,285.02 | $4,344.94 | $53,560.31 |
| 29 | Amort | $25,911.46 | $2,718.50 | $27,648.85 |
| 30 | Amort | $27,648.85 | $983.14 | $0.00 |
How Interest-Only Mortgages Work
An interest-only mortgage allows you to pay only the interest on your loan for an initial period (typically 5-10 years). During this time, your monthly payment is significantly lower because you are not paying down any principal.
After the interest-only period ends, the loan converts to a fully amortizing mortgage for the remaining term. Since the entire principal must now be repaid over a shorter period, your monthly payment increases — sometimes dramatically. For this loan, the payment jumps by $652.50 (37.6%) when the IO period ends.
Understanding the Payment Jump
IO payment (Years 1-10): $1,733.33/mo (interest only)
Amortizing payment (Years 11-30): $2,385.83/mo (P&I)
Standard 30-year payment: $2,022.62/mo (P&I for full term)
The amortizing payment is higher than a standard 30-year mortgage because the same loan amount must be repaid in only 20 years instead of 30. The shorter amortization period means higher monthly payments but faster equity buildup.
Interest-Only Mortgage: Pros and Cons
Advantages
- Lower initial monthly payments
- Increased cash flow during IO period
- Can invest the payment difference elsewhere
- Good for borrowers expecting higher future income
- Flexibility — you can pay principal optionally
Disadvantages
- No equity buildup during IO period
- Significant payment jump when IO ends
- Higher total interest over the life of the loan
- Risk of owing more than the home is worth
- Stricter qualification requirements
Frequently Asked Questions
What happens if I can't afford the payment increase?
Options include refinancing into a new loan with lower payments, selling the property, or negotiating a loan modification with your lender. The best strategy is to plan ahead and prepare for the payment increase before it happens. Making voluntary principal payments during the IO period can also reduce the eventual payment jump.
Are interest-only mortgages risky?
Interest-only mortgages carry higher risk than standard amortizing loans because you do not build equity during the IO period. If property values decline, you could owe more than the home is worth. The payment jump can also be difficult to manage if your income has not increased as expected. However, for financially disciplined borrowers with a clear plan, they can be a useful tool.
Can I refinance before the IO period ends?
Yes, refinancing before the IO period ends is common. You can refinance into a fixed-rate mortgage, a new interest-only loan, or any other loan product you qualify for. Keep in mind that since you have not paid down principal during the IO period, you will be refinancing the full original loan amount (assuming no home price appreciation).
What down payment is required for an IO mortgage?
Interest-only mortgages typically require a larger down payment than conventional loans — usually 20% to 30%. This protects the lender since no principal is being paid during the IO period. The exact requirements vary by lender and loan program.
How accurate is this interest-only calculator?
This calculator uses the standard mortgage amortization formula and accurately models the interest-only and amortizing periods. The IO payment is calculated as the monthly interest on the loan balance, and the amortizing payment uses the standard formula for the remaining term. Actual payments may vary based on your lender's specific terms.