Interest-Only Mortgage Calculator
Compare interest-only vs. principal-and-interest payments and see the total cost difference.
Before you calculate
The principal remains outstanding during the interest-only period. The later payment assumes amortization at the entered rate, excluding fees and escrow.
Interest-Only Mortgages
During the interest-only period, your payment covers only the interest charge — no principal is paid down. The full loan balance remains when the amortizing period begins. At that point, the loan must be fully repaid over the shortened remaining term, causing a significant payment increase (payment shock).
I/O Payment = Loan Balance × (Rate / 12) | After Reset: Payment = Balance × [r(1+r)^n] / [(1+r)^n − 1] | where n = remaining monthsExample Scenarios
Investment Property Cash Flow
Investors sometimes use I/O loans to maximize cash flow during a holding period, banking on property appreciation for returns. If the property appreciates, the equity gain offsets the higher total interest cost.
Payment Shock Risk
A $400,000 I/O loan at 7% jumps from $2,333/mo to $3,103/mo after a 10-year I/O period (20-year payoff). Borrowers must be prepared for this increase or plan to refinance before the reset.
Methodology & Assumptions
I/O payment is strictly interest: Balance × (rate/12). Amortizing payment is standard P&I on the same original balance over remaining term. Total interest includes both periods.
Sources & calculation notes
Maintained by MoneyCalc. Results are estimates based on the inputs and assumptions shown, not personalized financial advice or a lender quote. Default rates are examples unless a specific tax year or official table is identified.
References explain the underlying concepts or rules. They do not endorse or independently certify this implementation.
Calculations run in your browser. Some tools retain settings on this device. Displayed rounding can produce small differences from a statement or contract.