Interest-Only Mortgage Calculator
See your payment during the interest-only period and after it converts to a full payment.
Your Details
How It Works
- Enter your loan amount and rate.
- Enter the interest-only period length.
- Enter the remaining years to fully amortize after that.
Formula Used
No principal is paid down during the interest-only period.
Good to Know
- • The loan balance doesn't shrink at all during the interest-only period.
- • The payment jump after conversion can be significant — plan for it.
Important Notes
- • Interest-only loans are less common and often have stricter qualification.
- • Home value changes affect equity differently since principal isn't being paid down.
Why the Payment Jump Can Be a Shock
During the interest-only period, none of the payment reduces the loan balance — it's purely covering the interest charge. Once that period ends, the loan re-amortizes over the remaining term, meaning the payment now has to cover both interest and enough principal to pay off the full balance in the shorter remaining time — often producing a noticeably higher payment than many borrowers expect.
Who Interest-Only Loans Tend to Suit
These loans can make sense for borrowers expecting a significant income increase, planning to sell or refinance before the interest-only period ends, or wanting lower payments temporarily for cash flow reasons. They carry real risk if home values decline (since no equity builds through principal payments) or if the borrower isn't prepared for the payment increase at conversion.
The Basics, Defined
- Interest-only period — the phase where payments cover interest only, with no principal reduction.
- Recast / conversion — the point where the loan re-amortizes over the remaining term.
Example Case: The Payment Jump at Conversion
On a $300,000 loan at 6.5%, with a 10-year interest-only period followed by 20 years amortizing:
Payment after conversion (20-yr amortization) ≈ $2,236/month
The payment jumps by roughly $611/month — about 38% higher — the moment the interest-only period ends, because the full $300,000 balance (unchanged after 10 years of interest-only payments) now has to amortize over a shorter 20-year window instead of the original 30.
Interest-Only vs. Amortizing Comparison Table
On $300,000 at 6.5%:
| Structure | Monthly Payment |
|---|---|
| Interest-only | $1,625 |
| After conversion (20yr) | $2,236 |
| Standard 30yr amortizing from day 1 | $1,896 |
Mistakes That Skew Results With Interest-Only Loans
- Not planning for the payment jump — the conversion payment can be a significant shock.
- Assuming home value will always rise — no equity builds through payments during the interest-only phase.