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Interest Only Mortgage Calculator

If you’re thinking about taking out an interest-only home loan, my new interest-only mortgage calculator might be of some use.

While these types of loans aren’t as common these days, they are prevalent in the non-QM world and favored by real estate investors.

The calculation of an interest-only loan is actually pretty simple. It’s just the interest rate multiplied by the loan amount, divided by 12 (months).

But this calculator provides more than just that. You get to see the total interest expense, assuming the loan becomes fully-amortizing after the IO period ends (common).

And also a side-by-side comparison of an interest-only loan versus a fully-amortizing one to determine if it’s a good fit.

Interest-Only Mortgage Payment Calculator

Compare an interest-only mortgage against a fully amortizing loan side by side. See your I/O payment, the payment jump when amortization begins, total interest paid, equity buildup, full PITIA, DTI, and a complete amortization schedule showing both loans.

Loan Details

$
$
%
 
%
Same rate used for both I/O and fully amortizing comparison.

Interest-Only Period

yrs
During this period you pay interest only — no principal is reduced.
Loan must be fully repaid over this shorter window.
$
Interest-only payment during the I/O period.
$
Higher fully amortizing payment after I/O period ends.

PITIA & Monthly Liabilities Optional

Enter taxes and insurance for a full PITIA payment and DTI. Leave blank to compare P&I only.

%
$
of home price per year
%
$
of home price per year
%
$
PMI/MIP — leave at 0 if not applicable.
%
$
$
Car loans, student loans, credit card minimums, etc.
$
Used to calculate DTI. Optional.

PITIA Payment Breakdown

Debt-to-Income Ratio

Interest-Only vs. Fully Amortizing Comparison

Remaining Loan Balance Over Time

Amortization Schedule

Disclaimer: This calculator is for informational and educational purposes only and does not constitute financial, legal, or tax advice. Interest-only mortgages carry a payment shock risk when the amortizing period begins. Actual loan terms, rates, and qualifying criteria vary by lender. Property tax and insurance figures are estimates. Results do not guarantee loan approval. Consult a licensed mortgage professional before making any financial decisions.

This calculator is pretty simple and easy to use. Simply enter your loan amount, the mortgage rate, loan term, and the length of the interest-only period.

[Searching for a home loan? See your options with dozens of lenders fast.]

If it’s a home purchase, enter a down payment dollar amount or percentage.

For a mortgage refinance, simply enter the loan amount and enter a zero for the down payment.

There is also an optional DTI section if you want to enter monthly liabilities, gross income, and taxes/insurance.

From there, you'll see the comparison to a fully-amortizing loan along with an amortization schedule that shows monthly payments broken down by interest and principal.

Note that if you keep your IO loan for the entire IO period, it will eventually adjust into a fully-amortizing loan.

At that point, your monthly payment will jump because the loan term might be shorter and you'll no longer have the option of paying interest only.

Be sure to prepare for this possible payment shock accordingly to avoid any unwanted surprises.

Also note that because you won't actually pay down the loan at all during the interest-only period that the only way to build equity is via home price appreciation.

If the property value doesn't increase during that time, your loan-to-value ratio (LTV) may not come down, making a sale or refinance potentially more difficult in the future.

The good news is you always have the option to pay extra each month if you choose to.

Colin Robertson
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