Interest Only Mortgage Calculator
See the lower payment during an interest-only period and how much your payment jumps once principal repayment begins.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Loan amount
- $400,000
- Interest rate
- 6.50%
- Total term (years)
- 30
- Interest-only period (years)
- 10
for the first 10 years, then $2,982.29/mo
- Interest-only payment$2,166.67
- Payment after IO period$2,982.29
- Standard P&I payment$2,528.27
How the interest-only payment changes with loan amount
Holding the other inputs at the example above, here is how the result moves as loan amount changes.
| Loan amount | Interest-only payment | Interest-only payment |
|---|---|---|
| $200,000 | $1,083.33 | $1,083.33 |
| $400,000 | $2,166.67 | $2,166.67 |
| $600,000 | $3,250.00 | $3,250.00 |
| $800,000 | $4,333.33 | $4,333.33 |
The math behind it
During the interest-only period, your payment is just the loan balance times the rate divided by 12 — interest only, so the balance never falls. When that period ends, the calculator amortizes the full original balance at the same rate over the remaining years, giving the higher payment you switch to. It also shows the standard payment you would have on a fully-amortizing loan for comparison, and totals the interest paid during the IO years.
Assumptions & limits
- The rate is held constant for the whole term — this models an interest-only period on a fixed rate, not an interest-only ARM whose rate could reset.
- The balance stays flat through the interest-only period; you build no equity from payments during that time.
- After the IO period, the full balance amortizes over the shorter remaining term, which is what makes the payment jump.
- Payments are principal and interest (or interest only). Taxes, insurance, and mortgage insurance are excluded.
Source: Freddie Mac PMMS via FRED. Annual averages; latest weekly reading shown.
Common questions
How much lower is the interest-only payment?
It is lower by the entire principal portion of a normal payment. In the early years of a standard loan, a large share of each payment is interest anyway, so the interest-only payment can be noticeably smaller — but you pay for that with no equity gain and a bigger payment later.
Will I owe the same amount when the interest-only period ends?
Yes. Because interest-only payments never touch principal, your balance at the end of the IO period equals what you borrowed. The calculator then amortizes that full amount over the years left, which is why the payment rises sharply once repayment begins.
Is an interest-only mortgage a good idea?
It suits specific situations — irregular income, a plan to invest the savings, or an expected jump in earnings — where the lower early payment is worth deferring principal. For most buyers building wealth through home equity, a fully-amortizing loan is safer, since it pays the loan down from day one.