BCBetter Calculators

Interest-Only Mortgage Calculator

Calculate the monthly interest-only payment on a mortgage loan.

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Enter your values and click Calculate

How It Works

During the interest-only period, the monthly payment equals the outstanding loan balance multiplied by the monthly interest rate (annual rate divided by 12). Because no principal is repaid, the balance and therefore the monthly interest charge remain constant throughout the IO period. The total interest paid during the IO phase is simply the monthly IO payment multiplied by the number of IO months. After the IO period ends, the original full balance must be amortised over the remaining loan term. The post-IO payment is calculated using the standard amortisation formula applied to the remaining months. The calculator also computes what a traditional P&I payment would have been over the full original term for direct comparison.

Examples

$300k at 6.5%, 10-year IO, 30-year total
A standard 30-year mortgage with a 10-year interest-only period.
Result: IO payment: $1,625/mo. P&I after IO: approximately $2,108/mo.
$500k at 7%, 5-year IO, 30-year total
An investment property loan with a shorter IO period.
Result: IO payment: $2,917/mo. P&I after IO: approximately $3,627/mo.
$250k at 6%, 7-year IO, 25-year total
A mid-range home loan with a 7-year IO window.
Result: IO payment: $1,250/mo. P&I after IO: approximately $1,900/mo.

Frequently Asked Questions

Is an interest-only mortgage risky?
It carries meaningful risk for most borrowers. No equity is built during the IO period, and when amortisation begins the payment increases substantially because the full principal must be repaid over a shorter remaining term. If property values fall during the IO period, the borrower could owe more than the home is worth.
Who benefits from interest-only mortgages?
Real estate investors holding a property for a set period before selling, high earners expecting a future windfall, and borrowers in expensive markets who need a lower initial payment to qualify may benefit. The structure suits those who have a concrete plan for the eventual principal repayment.
What happens to my payment after the interest-only period ends?
Your payment rises significantly because the full original principal must now be repaid over only the remaining years of the loan term. This calculator shows that post-IO payment so you can plan for the transition well in advance.

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