Interest-Only Mortgage Calculator
The interest-only payment, the larger repayment payment once that period ends, and the extra interest against a repayment mortgage.
Result…
How it's calculated
Interest-only payment = L × yearly rate ÷ 12 Afterwards: L × i ÷ (1 − (1 + i)^−m), i = yearly rate ÷ 12, m = months left after the interest-only period Total interest = interest-only payment × its months + (payment × m − L)
During the interest-only period you pay only the interest, so the balance does not fall. When it ends, the whole loan has to be repaid over the years that are left, so the payment jumps, and the total interest is higher than on a repayment mortgage of the same length. If the loan stays interest-only to the end, the full balance is due then.
Your numbers, step by step
About the Interest-Only Mortgage calculator
This interest-only mortgage calculator shows what you pay while only the interest is due, and what happens when that period ends. Enter the loan amount, the rate, the total term and the length of the interest-only period. It gives the interest-only payment, the larger payment once repayments of the loan itself begin, and how much that payment rises. It also compares the total interest with a standard repayment mortgage of the same length. Set the interest-only period equal to the term to model a loan where the whole balance is still due at the end. The working is shown step by step with your numbers, so the jump in payment is clear before you commit.
How to use it
- Enter the “Loan amount” and the “Interest rate”.
- Enter the “Total term” of the mortgage in years.
- Enter the “Interest-only period”; make it equal to the term for a loan that never repays capital.
- Read the interest-only payment, the payment after the period and the extra interest against a repayment loan.
Worked example
A 300,000 loan at 6% over 30 years with a 10-year interest-only period costs 300,000 × 6% ÷ 12 = 1,500 a month at first. After 10 years the full 300,000 is repaid over the 20 years left, at 2,149.29 a month, a rise of 649.29. Total interest is 395,830.36, against 347,514.57 on a repayment mortgage at 1,798.65 a month: 48,315.79 more.
Updated
Questions people ask
How do I calculate an interest-only mortgage payment?
Multiply the loan amount by the yearly rate and divide by 12. A 300,000 loan at 6% costs 1,500 a month while only interest is paid.
Why does the payment jump after the interest-only period?
The balance has not fallen at all, so the whole loan must be repaid over fewer years. That makes each repayment payment larger than on a loan that was repaid from the start.
Does an interest-only mortgage cost more in total?
Usually yes, at the same rate and term, because the full balance earns interest for longer. The calculator shows the extra interest against a repayment mortgage.
What happens if the loan stays interest-only to the end?
The full balance is still owed after the last payment. You need a plan to repay it, such as savings, investments or selling the property.
What does this calculator assume?
A fixed rate throughout. Many interest-only loans have variable rates, and lenders set their own rules on who can take one and how the balance must be repaid. Check the terms with your lender or a mortgage adviser.