Introduction
An interest-only mortgage lets you pay just the interest on your loan for a set number of years.1 During that time, your monthly payment is lower because you are not paying down the principal. After the interest-only period ends, you either pay off the balance all at once, refinance, or start paying it down in monthly payments that are higher than before.1
This interest-only mortgage calculator shows you exactly what your monthly payments will be during both phases of the loan. It also shows how much total interest you will pay over the life of the loan. You can compare your interest-only loan side by side with a conventional mortgage to see which one costs more over time. The calculator includes a full amortization schedule, a principal balance chart, and a multi-scenario tool so you can test different loan amounts, rates, and terms all in one place.
Enter your loan amount, interest rate, loan term, and interest-only period to get started. If you plan to make extra payments during the interest-only phase, you can add those too. The results update right away so you can adjust your numbers and find the best option for your budget.
How to Use Our Interest Only Mortgage Calculator
Enter your loan details below to see your monthly payment during the interest-only period, your payment after that period ends, and how much total interest you will pay. You can also compare your interest-only loan to a standard mortgage side by side.
Home Value: Type in the full price of the home. This field is optional, but it helps the calculator figure out your loan amount when paired with a down payment.
Down Payment: Enter your down payment as a dollar amount or as a percent of the home value. Use the toggle to switch between the two. The calculator will subtract this from the home value to set your loan amount.
Loan Amount: This is the total amount you plan to borrow. It fills in on its own from the home value and down payment, but you can also type it in directly.
Loan Term: Enter the full length of your mortgage in years, from 1 to 50. A 30-year term is most common.
Interest-Only Period: Enter how many years you will make interest-only payments before the loan starts to amortize. This must be equal to or less than your loan term.
Interest-Only Rate: Enter the annual interest rate for your interest-only mortgage. This is the rate used to calculate your monthly payment during the interest-only phase.
Conventional Loan Rate: Enter the annual rate on a standard fully amortizing mortgage. This field is optional but unlocks the side-by-side comparison so you can see how much you save each month and how much more or less interest you pay over the life of the loan.
Monthly Principal Prepayment: Enter any extra amount you plan to pay toward the principal each month during the interest-only period. Even small prepayments can lower your remaining balance and reduce total interest.
Press Calculate to see your results, step-by-step math, a balance chart, a full amortization schedule, and a multi-scenario comparison tool.
What Is an Interest-Only Mortgage?
An interest-only mortgage is a type of home loan where you only pay the interest for a set number of years at the start. During this time, you do not pay down any of the money you borrowed.1 That means your monthly payments are lower at first, but your loan balance stays the same.
How Does an Interest-Only Mortgage Work?
An interest-only mortgage has two phases. The first phase is the interest-only period, which usually lasts 5 to 10 years. During this time, your payment only covers the interest the lender charges you. You do not reduce the amount you owe.
Once the interest-only period ends, the loan enters the amortization phase. Now your monthly payment goes up because you must pay both interest and principal in the years you have left. Since you have fewer years to pay off the full loan amount, the new payment can be much higher than what you were paying before.
Who Uses Interest-Only Mortgages?
Interest-only loans are often used by homebuyers who expect their income to grow, real estate investors who plan to sell the property before the interest-only period ends, or borrowers who want lower payments now and can handle higher payments later. Interest-only mortgages are not as common as standard mortgages and carry more risk.
Risks to Know About
The biggest risk is payment shock. When the interest-only period ends, your monthly payment can jump by hundreds or even thousands of dollars. If the remaining balance must be paid in full at the end of the term, you may face a large balloon payment. Another risk is that you build no equity during the interest-only years unless your home rises in value. If home prices drop, you could owe more than your home is worth.
You also pay more total interest over the life of the loan compared to a regular mortgage. This is because your balance does not shrink during the first phase, so interest keeps building on the full loan amount. Make sure your total housing costs, including principal, interest, taxes, and insurance, fit your budget.
Interest-Only vs. Conventional Mortgage
A conventional mortgage, also called a fully amortizing loan, splits every payment between interest and principal from the very first month. Your balance goes down a little each month, and your total interest cost is usually lower. An interest-only mortgage gives you smaller payments up front, but you pay more in the long run. This calculator lets you compare both side by side so you can see the exact difference in cost.
Making Extra Payments
Some lenders let you make voluntary prepayments during the interest-only period. This means you send extra money each month to reduce your loan balance. Prepayments lower the amount you owe when the amortization phase starts, which means a smaller payment increase later and less total interest paid. Even small extra payments can make a big difference over time.