Interest-Only Mortgage Calculator
Estimate your monthly payment during the interest-only phase, the payment after it ends, the payment shock, balloon payoff, and total interest — then compare it all against a fully amortizing loan.
Loan details
Results
Interest-only loan vs fully amortizing loan
| Measure | Interest-only design | Fully amortizing |
|---|
Total interest breakdown
Year-by-year schedule
| Year | Payment | Interest | Principal | End balance |
|---|
How the math works
During the interest-only phase, the monthly payment is simply loan balance × annual rate ÷ 12 — for example, $400,000 × 6.5% ÷ 12 = $2,166.67, with nothing reducing principal. When the phase ends, the full balance is amortized over the remaining months with the standard formula P × r(1+r)n / ((1+r)n − 1), or paid as a single balloon.
Frequently asked questions
What is an interest-only mortgage?
An interest-only mortgage is a home loan where you pay only the interest charges each month for a set period, typically 5 to 10 years, and the principal balance does not decrease. After the interest-only period ends, you must start paying principal and interest, refinance, or pay off the loan in full.
How do you calculate the interest-only monthly payment?
The interest-only monthly payment equals the loan balance multiplied by the annual interest rate divided by 12. For example, a $400,000 loan at 6.5% costs $400,000 x 0.065 / 12 = $2,166.67 per month in interest, with zero going toward principal.
What happens when the interest-only period ends?
Your monthly payment increases because you must now repay the full remaining principal over the remaining term. For example, a $400,000 loan at 6.5% with a 10-year interest-only period, then amortized over the remaining 20 years, jumps from $2,166.67 to $2,982.29 per month, a 37.64% payment shock.
Does an interest-only mortgage cost more than a fully amortizing loan?
Yes, because the principal stays untouched during the interest-only phase. For a $400,000 loan at 6.5% over 30 years with 10 interest-only years, total interest is $575,750.21, which is $65,572.26 more than the $510,177.95 of interest on the same loan fully amortized over 30 years.
What is an interest-only balloon mortgage?
An interest-only balloon mortgage pairs interest-only monthly payments with a single large balloon payment of the entire principal at the end of the interest-only period. For example, after 10 years of $2,166.67 interest-only payments on a $400,000 loan, a balloon of $400,000 is due at month 120.
How is this different from a regular fixed-rate mortgage calculator?
This calculator models a loan with an interest-only phase followed by amortization or a balloon payoff, which a standard calculator cannot do. If your loan amortizes principal from the very first payment with no interest-only phase, use a regular fixed-rate mortgage calculator instead.
Can the interest rate change after the interest-only period?
Yes, many interest-only loans are adjustable-rate mortgages that reset after the interest-only phase. For example, a $400,000 loan with 5 interest-only years at 6.0% costs $2,000.00 per month, and if the rate resets to 7.0% for the remaining 25 years, the amortized payment becomes $2,827.12 per month.
Do I build equity during the interest-only period?
No. Because every payment goes to interest and none reduces the principal, your loan balance stays exactly the same throughout the interest-only period. You only build equity if the property value rises or you make extra principal payments.
What are typical interest-only period lengths?
The most common interest-only periods are 5, 7, and 10 years. Some loans offer 3-year or 15-year interest-only phases. The total loan term is usually 30 years, so a 10-year interest-only period leaves 20 years to amortize the full balance.
Who is an interest-only mortgage good for?
Interest-only mortgages suit borrowers who expect rising income, plan to sell or refinance before the interest-only period ends, or want maximum cash flow, such as real estate investors. They are risky for buyers who cannot afford the higher amortized payment later.
What are the risks of an interest-only mortgage?
The main risks are payment shock when amortization begins, building zero equity during the interest-only phase, higher total interest over the life of the loan, and refinancing risk if rates rise or property values fall before the interest-only period ends.
Is this calculator financial advice?
No. This calculator provides estimates for educational purposes only and is not financial, legal, or professional advice. Mortgage terms vary by lender and jurisdiction. Consult a licensed mortgage professional or financial advisor before making borrowing decisions.
Free tool by NRTechStudio