Calcs4All

APR 23 · 2026

Interest-only loan calculator

Estimate the interest-only payment, interest-only period cost, and later amortizing payment reset.

What this calculator covers

Use this calculator to compare the low payment during an interest-only period with the higher payment that follows when principal amortization begins.

The output also shows how much the interest-only period costs before any principal reduction starts.

Frequently asked questions

Why is the payment higher after the interest-only period ends?
During the interest-only window, payments cover only the monthly interest charge and the principal balance stays unchanged. Once amortization begins, that full balance must be repaid over the remaining term, which is shorter, producing a larger monthly payment.
Does any of my payment during the interest-only period go toward principal?
No. Every payment during the interest-only phase is pure interest cost. At the end of that period, the outstanding balance equals the original loan amount — nothing has been paid off.
Are interest-only loans only used for mortgages?
They are most common in mortgage products, but some personal and commercial loans also offer interest-only periods. The same payment dynamics apply regardless of the loan type.
What happens to total interest cost with an interest-only period?
It increases. Carrying the full principal longer means more cumulative interest compared with a fully amortizing loan of the same amount and rate. The interest-only period total plus the later amortization interest gives a combined projected interest figure.

Tool

Run the calculation

$
%
yr
yr

RESULT · IO PAYMENT

â„–208

Primary result

$1,500.00

A $300,000.00 interest-only loan at 6% costs $1,500.00 per month during the 5-year interest-only period, then about $1,932.90 per month once principal amortization begins.

Interest-only monthly payment
$1,500.00
Interest-only period cost
$90,000.00
Payment after IO period
$1,932.90
Total projected interest
$369,871.26

Step-by-step solution

  1. 1.Convert the annual rate of 6% into a monthly rate and multiply it by the loan amount to find the interest-only payment of $1,500.00.
  2. 2.Because principal does not amortize during the first 60 months, the interest-only period costs $90,000.00 and leaves the full $300,000.00 balance outstanding.
  3. 3.Amortize that unchanged principal over 300 months to estimate the later payment jump to $1,932.90.

Walkthrough

Visual walkthrough

An interest-only loan has two phases: a low initial payment that covers only interest, followed by a higher amortizing payment once principal repayment begins.

  1. 01

    Find the interest-only payment

    $300,000.00 × monthly rate

    During the interest-only window, the payment covers only the monthly interest charge on the full principal balance.

  2. 02

    Count the IO cost

    60 interest-only months

    Because principal is unchanged during this period, every payment is interest cost instead of loan payoff.

  3. 03

    Read the payment reset

    Once amortization begins, the full principal must be repaid over a shorter remaining term, so the payment rises.

    $1,932.90 after IO