Interest-Only Mortgage Calculator — See Your Real Monthly Payment

Interest-only mortgages offer lower initial payments by requiring borrowers to pay only the interest accruing each month without reducing the principal balance. This structure appeals to real estate investors who want to maximize monthly cash flow during a defined hold period before selling, to high-income earners expecting a large future bonus or liquidity event that will allow a lump-sum principal paydown, and to buyers in expensive markets who need to qualify for a larger loan amount with a lower initial payment. The key risk is that principal repayment is entirely deferred — when the interest-only period ends, monthly payments jump substantially because the full original principal must now be amortised over only the remaining shorter loan term, not the full original term. This payment increase is often called payment shock. This calculator shows the monthly IO payment, the higher post-IO amortising payment, a full-term standard P&I comparison, and the total interest paid during the IO phase, giving you a clear picture of the cost and payment-shock risk before committing to this loan structure.

During the interest-only period, the monthly payment equals the outstanding loan balance multiplied by the monthly interest rate (annual rate divided by 12). Because no principal is repaid, the balance and therefore the monthly interest charge remain constant throughout the IO period. The total interest paid during the IO phase is simply the monthly IO payment multiplied by the number of IO months. After the IO period ends, the original full balance must be amortised over the remaining loan term. The post-IO payment is calculated using the standard amortisation formula applied to the remaining months. The calculator also computes what a traditional P&I payment would have been over the full original term for direct comparison.