Interest-Only Mortgage Calculator
Find the monthly payment on an interest-only loan.
Results update as you type.
How it works
An interest-only mortgage lets a borrower pay only the interest for an initial period, keeping payments low, and this calculator finds that payment. You enter the loan amount and the interest rate, and it returns the monthly interest-only payment and the total annual interest. The payment is simply the balance times the annual rate divided by twelve, since none of it goes toward principal. The appeal is a lower monthly payment: on a $300,000 loan at 6 percent, the interest-only payment is $1,500 a month, versus about $1,799 for a fully amortizing 30-year loan, freeing up cash flow. This can suit borrowers with irregular income, those expecting higher earnings later, or investors prioritizing cash flow. But the trade-off is significant: because you pay no principal, the balance never shrinks during the interest-only period, so you build no equity through payments, and when the interest-only period ends the payment jumps sharply as you must then repay the full principal over a shorter remaining term. You also pay more interest overall. Interest-only loans carry more risk and are best understood clearly before choosing one. This calculator shows the payment during the interest-only phase; use an amortization or mortgage calculator to see the higher payment afterward. Enter your loan amount and rate to compute the interest-only payment.
Monthly payment = loan amount × annual rate / 12
During an interest-only period, the monthly payment covers only the interest and none of the principal, so it equals the loan balance times the annual rate, divided by 12. Because no principal is repaid, the balance stays the same and the payment is lower than a fully amortizing loan, but the debt is not reduced.
Source:Loan calculation
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Worked example
How to use this calculator
- 1
Enter your values
Enter loan amount and interest rate.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Monthly interest-only payment updates instantly as you type — no button to press.
Frequently asked questions
How is an interest-only payment calculated?
Multiply the loan balance by the annual interest rate, then divide by twelve for the monthly amount. A $300,000 loan at 6 percent has an interest-only payment of $1,500 a month. Since none of the payment reduces principal, the balance stays constant throughout the interest-only period.
Why is an interest-only payment lower?
It is lower because it covers only the interest and none of the principal repayment that a normal mortgage payment includes. This frees up monthly cash flow, but it also means you build no equity through payments and the full loan balance still has to be repaid later, usually at a much higher payment.
What happens when the interest-only period ends?
When the interest-only period ends, the loan converts to a fully amortizing schedule, and you must repay the entire principal over the remaining, shorter term. This causes the payment to jump substantially, a phenomenon called payment shock. Borrowers should plan for this significant increase before choosing an interest-only loan.
Who might use an interest-only mortgage?
Interest-only loans can suit borrowers with irregular or seasonal income, those confident their income will rise, and real estate investors focused on cash flow who plan to sell or refinance before the interest-only period ends. They carry more risk, so they are generally not ideal for buyers relying on steady principal paydown to build equity.
Do I pay more interest overall?
Yes. Because the principal is not reduced during the interest-only period, you pay interest on the full balance for longer, and the total interest over the life of the loan is higher than an equivalent fully amortizing mortgage. The lower early payments come at the cost of greater total interest and delayed equity.