Compare interest-only versus fully amortizing payments
For borrowers considering interest-only mortgages: model interest-only period payments and compare to traditional full amortization.
Interest-Only Mortgage Calculator
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Create Free AccountWhat it does
The Interest-Only Mortgage Calculator models monthly payment obligations during an interest-only period and then compares them to fully amortizing alternatives. See how low interest-only payments look initially and then understand the payment shock when the loan converts to principal & interest amortization.
Interest-only mortgages reduce early payments but defer principal repayment, creating dramatic payment increases at the amortization start. This calculator prevents buyer surprise by showing both the honeymoon-phase low payment and the realistic payment after interest-only ends.
Who it's for
- Borrowers with increasing income planning to absorb higher payments at interest-only expiration
- Real estate investors evaluating interest-only financing to maximize early cash flow
- Lenders explaining payment structures and conversion mechanics to interest-only applicants
- Financial advisors assessing whether borrowers can sustain higher payments when conversion occurs
How it works
Enter loan details: amount, rate, term
Define interest-only period (e.g., 10 years) and amortization period after.
Calculate interest-only payment
Monthly interest with no principal reduction.
Calculate fully amortizing payment after
When IO period ends, payment balloons to cover remaining balance in remaining time.
Why it matters
See lower payment during interest-only period
Forecast payment balloon when amortization begins
Model whether lower payments justify interest-only risk
Compare interest-only to investment or refinance strategy
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Frequently asked questions
When do interest-only mortgages make sense?
Short hold (flips, investment with refinance planned), strong income expecting to grow, or bridge financing before primary income kicks in.
What happens when the IO period ends?
Payment jumps dramatically — you now amortize remaining balance over shorter period. Plan refinance or sale before this date.
How much lower is interest-only payment?
For $400K at 6%: fully amortizing 30-year = $2,398. IO only = $2,000. Savings: ~$398/month during IO period only.
Are interest-only mortgages risky?
Yes — if property value drops or refinance rates spike, you're trapped. Use only if income/exit strategy is solid.
Is this calculator free to use?
Yes — create a free Investor Starter account to run 1 calculator per day. No credit card required. Upgrade to Core ($49/mo) for unlimited access to all 67 calculators.
How accurate are the results?
Results are only as accurate as your inputs. The formulas use industry-standard real estate investment math. Always verify with a licensed professional before committing capital.
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