The Loan
Results
Interest-Only Mortgage Calculator Guide
An interest-only mortgage lets you pay only the interest for a set period. The payment is lower. Nothing else about the loan gets better.
Interest-only payment = balance × (rate ÷ 12)
$300,000 at 6% = $1,500 a month — against $1,798.65 on a normal 30-year loan.
When the IO period ends, the full balance amortises over the years that remain.
You Owe Exactly What You Started With
This is the part that catches people. After ten years of paying $1,500 a month — $180,000 handed over — you still owe $300,000. Every cent went to interest. Not one dollar touched the balance.
You didn't buy any equity. You rented the money.
The Payment Shock Is Structural
When the interest-only period ends, you still owe the full amount — but you now have fewer years to repay it. $300,000 over 20 years instead of 30 means the payment jumps from $1,500 to about $2,149. That's a 43% increase, on a schedule you agreed to a decade earlier.
And it often arrives alongside a rate reset, because many interest-only loans switch to variable at the same moment. Try entering a higher rate in the optional field — the two effects compound, and the result is why these loans have the reputation they do.
When It Genuinely Makes Sense
There are real uses. Irregular income where you want a low required payment and intend to make large voluntary ones. A property you're certain you'll sell before the IO period ends. An investment property where the numbers only work at the lower payment and the tax treatment favours it.
What these share is a plan for the principal that doesn't depend on hope. "Prices will rise" is not a plan. "I'll refinance later" is not a plan either — refinancing requires the lending conditions of the future to cooperate, and they may not.
The Discipline Version
Some people take interest-only deliberately, pay the difference into investments, and end up ahead. This works if you actually do it, every month, for a decade, without touching the money.
The honest question isn't whether the strategy can work. It's whether you'll execute it in year seven, when something expensive happens and there's a pot of money sitting right there.
Related: mortgage calculator, amortization calculator, mortgage payoff calculator.
These results are estimates for education and planning, not financial advice. Actual returns, rates, and terms vary — check with a qualified professional before making decisions.
Need a Calculator We Don't Have Yet?
Can't find the calculator you need? We'll build it. Submit your request and we'll evaluate it for our growing collection.
Request Calculator