An interest-only mortgage calculator is a specialized financial tool that calculates monthly payments for mortgages where borrowers pay only interest for an initial period, followed by full principal and interest payments for the remaining term. It shows the dramatic payment increase when the interest-only period ends and helps borrowers understand total costs.

This calculator helps with:

• Payment shock preparation - Understand how much payments increase after interest-only period
• Initial affordability planning - Determine if lower initial payments fit current budget
• Long-term cost analysis - Compare total interest costs versus traditional mortgages
• Investment property evaluation - Assess cash flow for rental properties with interest-only loans
• Refinancing timing - Plan when to refinance before payment shock occurs

For standard mortgage payment calculations with immediate principal and interest amortization, use our home mortgage calculator to compare traditional loan costs.

To see detailed month-by-month payment breakdowns and amortization schedules, explore our mortgage amortization calculator for complete payment analysis.

When considering paying down your mortgage faster, try our mortgage acceleration calculator to evaluate extra payment strategies and time savings.

For comparing different loan structures and terms side-by-side, use our mortgage comparison calculator to evaluate multiple mortgage options simultaneously.

Interest-only mortgages split into two distinct payment periods with dramatically different monthly costs and payment structures.

The formulas:

Where:

• Interest-Only Payment - Monthly interest charge, no principal reduction
• Full Payment - Amortized payment covering principal and interest
• Remaining Term - Years left to pay off loan after interest-only period
• Payment Increase - Additional monthly cost when amortization begins

During the interest-only period, your principal balance remains unchanged. When amortization begins, you must repay the full loan amount over fewer years, causing substantially higher monthly payments.

1. Enter the loan amount - Input the total mortgage amount you're borrowing
2. Set the interest rate - Enter your mortgage interest rate (often slightly higher than traditional mortgages)
3. Choose interest-only period - Select how many years you'll pay interest only (typically 5-10 years)
4. Enter total loan term - Input the full mortgage term including both interest-only and amortization periods
5. Review payment shock - See the initial interest-only payment and the much higher full payment afterward
6. Compare with traditional mortgages - Evaluate if the initial savings justify the risks and higher total costs

• Understand payment shock - See exactly how much your payment will increase when amortization begins
• Plan for the future - Budget for higher payments or plan refinancing timing before payment shock occurs
• Compare loan structures - Evaluate interest-only versus traditional mortgages to make informed decisions
• Calculate total costs - Understand total interest paid over the loan lifetime, not just initial payments
• Assess affordability - Determine if you can truly afford the loan when full payments begin
• Investment property analysis - Evaluate cash flow for rental properties with lower initial payments

• Interest-only period length - Longer periods mean more years of low payments but higher payment shock and total interest
• Interest rate - Higher rates increase both interest-only and full payments, amplifying the payment shock difference
• Total loan term - Shorter remaining terms after interest-only period create higher payment shock
• Property appreciation - Declining values can trap you in unaffordable mortgages by preventing refinancing or selling
• Income changes - Job loss or income reduction during interest-only period may make future payments unaffordable