Interest Only Loan Calculator

Interest Only Loan Calculator

Interest-only loans let you pay just the interest for an initial period, then principal and interest later.

What This Calculator Shows

• Monthly Payment: Your expected payment amount based on loan terms
• Total Interest: The cost of borrowing over the loan lifetime
• Amortization Schedule: How payments split between principal and interest
• Payment Breakdown: Visual representation of your loan costs

How to Calculate

1. Enter your loan amount 2. Input the interest rate (APR) 3. Select the loan term 4. Review your payment details and total costs

Key Considerations for Interest Only Loan

• Compare offers from multiple lenders before committing
• Understand all fees including origination, closing costs, and prepayment penalties
• Consider how rate changes might affect your payments (for variable rates)
• Factor in your overall financial goals and debt-to-income ratio

Interest-only means the payment covers interest and nothing else for an initial period — typically 5 to 10 years. The balance does not move.

Period	Payment on $400,000 at 6.5%
Years 1–10 (interest only)	$2,167
Years 11–30 (fully amortising over 20)	$2,983
Standard 30-year for comparison	$2,528

Two consequences follow. The payment jumps 38% at the transition, and because the balance never fell, you build no equity during the interest-only years — you are relying on price appreciation alone. In a flat market you exit with the same balance you started with, having paid $260,000 in interest.

Interest-only suits irregular income where you intend to pay down principal in lump sums. It does not suit stretching to afford a larger house.

The Numbers This Page Opens With

The calculator above starts at $400,000 over 30 years at 6.5%, which is representative for this product:

Monthly payment	$2,528
Total repaid	$910,178
Total interest	$510,178
Interest as a share of principal	128%

Change any input above and every figure recalculates. The amortisation formula behind it:

`` M = P × [ r(1+r)^n ] / [ (1+r)^n − 1 ]

P = principal, r = monthly rate (annual ÷ 12), n = number of payments ``

Before You Sign

• Compare APR, not the rate. APR includes origination and points; the rate does not.
• Ask about prepayment penalties. They turn a plan to pay early into a fee.
• Rate-shop inside 14 days. Credit scoring models treat multiple mortgage or auto

enquiries in that window as one enquiry.

• Check whether the payment includes escrow. A mortgage quote without taxes and insurance

understates the real monthly cost by hundreds.

Where the Money Goes

On $400,000 at 6.5% over 30 years, paying $2,528 a month:

Point	Principal repaid	Interest paid	Balance
Year 3	$14,331	$76,687	$385,669
Year 8	$41,797	$185,747	$358,203
Year 15	$109,763	$345,326	$290,237
Year 23	$220,283	$462,350	$179,717
Year 30	$400,000	$510,178	$0

Early payments are mostly interest. That is not a fee structure — it is arithmetic: interest accrues on the outstanding balance, which starts at its largest. It is also why an extra payment made early saves far more than the same payment made late.

What a Rate Change Costs

Rate	Monthly	vs 6.5%	Total repaid
5.50%	$2,271	-$257	$817,616
6.00%	$2,398	-$130	$863,353
6.50%	$2,528	—	$910,178
7.00%	$2,661	+$133	$958,036
7.50%	$2,797	+$269	$1,006,869

Half a percentage point moves the monthly payment by $133 and the total by $47,858. Shopping three lenders usually beats any amount of negotiating on price.