Introduction
An interest-only loan lets you pay just the interest for the first few years. During this time, your monthly payment is lower because you are not paying down the loan balance. But when that period ends, your payment jumps up — sometimes by a lot. This can catch people off guard if they don't plan ahead.
This interest only calculator shows you exactly what your payments will be during both phases of the loan. Enter your loan amount, interest rate, interest-only period, and total loan term to see your monthly payment now, your higher payment later, and how much total interest you will pay. You can also add an optional extra payment each month to see how much money and time you could save by paying down principal early.
The calculator gives you a full payment schedule, a step-by-step breakdown of the math, and a chart of your remaining balance over time. Use it to compare costs, prepare for the payment increase, and decide if an interest-only mortgage is the right choice for you.
How to Use Our Interest Only Calculator
Enter your loan details below to see your monthly interest only payment, your higher payment after the interest only period ends, and your total interest cost over the life of the loan.
Loan Amount — Type in the total amount you plan to borrow. This is the full principal balance of your loan, up to $100,000,000.
Annual Interest Rate — Enter the yearly interest rate on your loan. This is the APR your lender gives you, from 0.001% to 30%. If you need help understanding the difference between APR and APY, try our APR Calculator or APY Calculator.
Interest-Only Period — Choose how many years you will make interest only payments. During this time, your balance stays the same because you are not paying down the principal.
Total Loan Term — Enter the full length of your loan in years. This includes both the interest only period and the time you spend paying off the principal. It must be longer than the interest only period.
Additional Monthly Prepayment — Enter any extra money you want to pay toward your principal each month. This helps you pay off the loan faster and save on interest. Set this to 0 if you do not plan to make extra payments. For a deeper look at how extra payments reduce your mortgage, see our Mortgage Extra Payment Calculator.
Click Calculate Interest Only Payments to see your results. The calculator will show your monthly payments for both phases, a step-by-step breakdown of the math, an amortization schedule, and a chart of your remaining balance over time.
What Is an Interest-Only Loan?
An interest-only loan is a type of loan where you only pay the interest for a set number of years. During this time, your monthly payment is lower because you are not paying down the loan balance at all. The money you owe stays the same. This is different from a standard mortgage, where every payment includes both interest and principal from the start.
After the interest-only period ends, the loan switches to regular payments. Now each payment covers both interest and a portion of the principal. Because you have fewer years left to pay off the full balance, your monthly payment goes up — sometimes by a lot. This jump in payment is often called payment shock. You can use our Amortization Calculator to see how a fully amortizing loan compares side by side.
How This Calculator Helps
This interest-only calculator shows you exactly what your payments will be during both phases of the loan. It calculates your low interest-only payment, your higher amortizing payment, and the difference between them. It also shows the total interest you will pay over the life of the loan and builds a full payment schedule so you can see how your balance changes month by month. To understand how much of each payment goes toward interest versus principal, our Loan Payment Calculator can provide additional insight.
If you plan to make extra payments toward your principal, enter that amount in the prepayment field. The calculator will show you how much interest you can save and how many months earlier you could pay off the loan. For a broader strategy on eliminating debt faster, check out our Mortgage Payoff Calculator or Debt Payoff Calculator.
Who Uses Interest-Only Loans?
Interest-only loans are common in real estate investing, jumbo mortgages, and construction lending. Some borrowers choose them to keep payments low in the early years when cash flow is tight. Others use them as a short-term strategy when they plan to sell or refinance before the amortizing period begins. Real estate investors often evaluate properties using the Cap Rate Calculator or Rental Yield Calculator to decide whether an interest-only structure makes financial sense.
Risks to Keep in Mind
Because you are not paying down the principal during the interest-only phase, you do not build equity from your payments. If property values drop, you could owe more than your home is worth. You can check your current equity position with our LTV Calculator. You also pay more total interest over the life of the loan compared to a standard mortgage with the same rate and term — our Interest Calculator and Simple Interest Calculator can help you compare the cost. Before committing, use the Home Affordability Calculator and DTI Calculator to make sure you can afford the higher payment that kicks in after the interest-only period ends.