Interest-Only Loan Payment Calculator
See your low interest-only payment now and the higher fully-amortizing payment that kicks in once the interest-only period ends.
How it works
Interest-only payment = balance × (rate ÷ 12) · Payment after IO = PMT on full balance over remaining months
During the interest-only period you pay only the monthly interest, so the balance never falls and the payment is low. When that period ends the loan must still be repaid over the years that remain, so the full principal is amortized into a much shorter window — which is why the payment jumps sharply. Because you build no equity while paying interest only, the total interest over the life of the loan is higher than a standard amortizing loan.
Worked example
On a $300,000 loan at 6.5% with a 5-year interest-only period on a 30-year term, the interest-only payment is 300,000 × 0.0054167 = $1,625/mo. After 5 years the full $300,000 amortizes over the remaining 25 years at $2,025/mo — a $400 jump — and you have paid $97,500 in interest with the balance untouched.
Frequently asked questions
Does the balance go down during the interest-only period?
No. Interest-only payments cover just the interest, so the principal stays exactly the same until the interest-only window ends. You can usually make voluntary extra principal payments to change that.
Why does my payment jump so much later?
Once the interest-only period ends, the entire original balance has to be repaid over the years that remain — a shorter span than the original term — so each payment must cover much more principal.
Is an interest-only loan cheaper overall?
Usually no. The low early payments come at the cost of building no equity, so you pay more total interest than an equivalent loan that amortizes from day one.
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Educational estimate, not financial advice.