Interest-Only Mortgage Calculator
Compare interest-only home loan repayments with the higher principal-and-interest payments that follow, plus the extra total interest this structure costs.
Your results
Calculation breakdown
- Interest-only payment
- $500,000.00 × (6% ÷ 12) = $2,500.00 per period
- Extra interest vs P&I from start
- $616,452.10 (IO structure) − $579,190.95 (P&I from day one) = $37,261.16
Assumptions
- After the interest-only period, the loan converts to principal and interest over the remaining term.
- Interest rate is assumed constant across the whole loan life.
- The comparison loan pays principal and interest from day one at the same rate and term.
- No fees, rate changes at IO expiry, or refinancing are factored in.
How this calculator works
During the interest-only period you pay only the interest on the unchanged principal. Afterwards the full balance must be amortised over the shorter remaining term, which is why repayments jump. This calculator quantifies both the payment increase and the extra interest.
Frequently asked questions
Why do repayments jump so much?
The same principal has to be repaid over fewer remaining years, so each payment carries far more principal.
Who uses interest-only loans?
Most commonly property investors, and sometimes owner-occupiers managing a short-term cash flow squeeze.
Does interest-only cost more overall?
Almost always, because the balance is not reducing during the interest-only period.
Results are estimates only and are not financial, tax, legal or credit advice.