Interest-Only Mortgage Calculator

Interest-only loans promise a tiny payment now — and a much bigger one later. This calculator shows both payments, the size of the jump, and exactly how much extra interest the structure costs you.

1 · Afford 2 · Payment 3 · Schedule 4 · Pay off early 5 · Closing costs 6 · PMI 7 · Refinance 8 · Rates guide

The payment shock is the whole story

On a $400,000 loan at 6.9%, the interest-only payment is $2,300 a month — for ten years you pay $276,000 and your balance is still exactly $400,000. Then the loan must amortize over the remaining 20 years, and the payment leaps to about $3,070. If that number would break your budget in year eleven, the loan is wrong for you in year one.

Who uses interest-only loans sensibly?

Buyers with large, reliable bonuses or commissions who pay principal in chunks.
Short-horizon owners who will sell before the IO period ends — and accept the risk if plans change.
Investors managing cash flow across properties (with reserves to match).

The cost, honestly

An interest-only structure at the same rate costs more total interest than a standard loan because the balance never falls during the IO years — on the example above, roughly six figures more over the full term. IO loans also build equity only through home-price appreciation, which is never guaranteed. Compare against a standard amortizing payment in the payment calculator, or an ARM if a lower initial payment is the real goal. If your income is variable, the safer play is a standard loan you pay extra on when cash is good — model that in the payoff calculator.

Your next steps

Safer alternative

Standard payment calculator

See the fully-amortizing payment on the same loan.

Similar risk

ARM calculator

Price the worst case of an adjustable-rate loan before you commit.

Build equity

Payoff calculator

Model voluntary principal payments on a normal loan.

Related calculators

Mortgage Payment Calculator

Your true monthly payment with taxes, insurance & PMI.

Mortgage Payoff Calculator

Extra payments, lump sums, years and interest saved.

Home Affordability Calculator

How much house your income can really carry.

ARM Calculator

ARM payments: expected and worst case.

Frequently asked questions

How is an interest-only payment calculated?

Loan balance × annual rate ÷ 12. On $400,000 at 6.9%, that is $2,300 a month — none of it reduces what you owe.

What happens when the interest-only period ends?

The entire original balance must be repaid over the remaining term, so payments jump sharply — in the example, from $2,300 to about $3,070. Some loans instead require a balloon payoff.

Do interest-only loans still exist after 2008?

Yes, mostly as portfolio and jumbo products from banks and credit unions, and they are typically adjustable-rate. They are uncommon for conforming loans and require strong credit, significant assets and usually 20–25% down.

Can I pay principal during the IO period?

Usually yes, voluntarily. Every principal dollar paid reduces the next month's interest charge and softens the eventual payment increase.

Is an interest-only loan a good idea for a first home?

Almost never. First-time buyers generally benefit from forced equity building and payment stability. IO structures suit experienced borrowers with irregular high income and large reserves.

Sources & further reading

Official sources for program rules and consumer rights. Zorvex is not affiliated with these agencies; figures here are estimates for education.