Simple Mortgage Calculator

Interest-Only Mortgage Calculator

Compare interest-only vs. standard payments and total costs

An interest-only (IO) mortgage lets you pay just the interest for a set period, lowering the initial monthly payment. Use the calculator below to estimate your payment during the interest-only phase, see how it changes once principal payments begin, and compare to a standard fixed-rate schedule. You’ll also get totals for interest paid, a payoff timeline, and printable amortization tables.

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First Month Breakdown (Interest-Only Plan)

Balance and costs over time (yearly)

Amortization schedule (IO plan)

Enter Loan Details

Results (Interest-Only Plan)

First month (all-in)
$2,766.67
Taxes / mo
$416.67
Insurance / mo
$133.33
HOA / mo
$50.00
Total interest (IO plan)
$575,750.21
Total P&I cost (IO plan)
$975,750.21
Amortization length
30 yr (360 mo)
Start LTV (P/I only)
100.00%

Compare vs. Standard Fully Amortizing

IO first month (all-in)
$2,766.67
Std first month (all-in)
$3,128.27
Total interest (IO)
$575,750.21
Total interest (Std)
$510,177.95
Total P&I (IO)
$975,750.21
Total P&I (Std)
$910,177.95

The standard comparison uses the same loan, rate, and extra principal—no interest-only phase.

What is an Interest-Only Mortgage?

With an interest-only mortgage, you pay only interest for the first few years (e.g., 5, 7, or 10 years). Your monthly payment is smaller, but your principal doesn’t drop during that time—unless you choose to pay extra principal. After the IO period ends, your loan converts to a fully amortizing schedule where you pay both principal and interest, which increases your monthly payment.

A simple formula for an IO payment is: (Annual Rate × Loan Amount) / 12.

How to Use the Interest-Only Calculator

  • Enter your loan amount, interest rate, and total term (e.g., 30 years).
  • Choose an interest-only period (e.g., 5–10 years).
  • Optionally add taxes, insurance, HOA, and extra principal.
  • Compare to a standard (fully amortizing) schedule for the same loan.

Interest-Only vs. Standard Mortgage: A Comparison

IO loans reduce near-term payments but may raise long-term costs. The standard schedule pays principal from month one, building equity sooner and lowering total interest over the life of loan.

Pros and Cons of an Interest-Only Mortgage

Pros

  • Lower initial monthly payment.
  • Cash-flow flexibility in early years.
  • Option to prepay principal anytime.

Cons

  • No automatic equity build during IO phase.
  • Payment “jump” when IO ends.
  • Potentially higher total interest cost.

Who is an Interest-Only Mortgage For?

IO mortgages can fit short-term owners, investors, or borrowers who expect higher income later (and can manage the post-IO payment). They’re less ideal if you need steady principal reduction from day one.

Example: Interest-Only Loan Explained

Suppose a $400,000 loan at 6.50% with a 10-year IO period and a 30-year total term. During IO, the monthly interest-only payment is roughly 0.065 × 400,000 / 12 ≈ $2,167 (plus taxes/insurance/HOA). After IO ends, the remaining principal amortizes over the remaining 20 years, increasing the P&I payment.

Frequently Asked Questions

Is an interest-only mortgage a good idea?

It depends on your timeline and cash-flow goals. Weigh a lower initial payment against future payment increases and long-term costs.

How do I calculate an IO payment?

Multiply the annual rate by the loan amount, then divide by 12.

What happens after the IO period?

Your loan converts to a fully amortizing schedule, so your monthly P&I generally increases to pay down principal over the remaining term.

See also: Mortgage Payment Calculator · Balloon Mortgage Calculator