Interest-only loan calculator
This interest-only loan calculator shows the payment during the interest-only period and how much it jumps when principal repayment begins.
The payment jump
During the interest-only period you pay only the interest, so the balance does not fall. When it ends, the loan must be repaid over the remaining years, and the payment rises sharply because the same balance is now spread over fewer years. The calculator shows both payments and the increase so you are not surprised.
Who these loans suit
Interest-only loans can suit borrowers with irregular or rising income, or investors who plan to sell. They carry risk: you build no equity during the interest-only years unless the home appreciates, and you could owe more than the home is worth if prices fall.
Interest-only period vs the payment jump
On $300,000 at 6.5% over 30 years, a longer interest-only period lowers the early payment but raises the later one.
| Interest-only years | Payment during | Payment after | Total interest |
|---|---|---|---|
| None (standard) | $1,896.20 | $1,896.20 | $382,637 |
| 3 | $1,625.00 | $1,966.66 | $395,702 |
| 5 | $1,625.00 | $2,025.62 | $405,187 |
| 7 | $1,625.00 | $2,097.19 | $415,327 |
| 10 | $1,625.00 | $2,236.72 | $431,812 |
Frequently asked questions
Do interest-only payments reduce the balance?
No. The balance stays the same until the interest-only period ends and principal repayment begins.
Is interest-only cheaper overall?
No. It has a lower payment at first but more total interest than a fully amortizing loan.
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Estimates from standard loan formulas, not a loan offer or financial advice. Example rates are assumptions: use your own quote.