Interest-Only Mortgage Calculator

Calculate interest-only mortgage payments and understand what you are really paying for

An interest-only mortgage is simple on the surface: you pay interest each period, and your loan balance stays the same. That can make the payment look attractive compared to a standard repayment mortgage, especially in the early years. The catch is that you are not paying down the principal, so the balance does not shrink and the interest cost stays higher than it would on a repayment loan with the same rate.

This calculator gives you a practical view of an interest-only mortgage. It calculates your interest-only payment based on your loan amount and annual interest rate, then estimates how much interest you will pay over an interest-only period (for example 5 years). If you add monthly extras like insurance, rates, or HOA fees, it also shows an estimated all-in payment so you can compare it to your real monthly cash outflow.

To keep this useful for both quick checks and more serious comparisons, the calculator includes a simple repayment comparison. With the same loan amount and interest rate, it estimates the monthly payment on a standard repayment mortgage (amortizing loan) over a typical term (default 30 years). This is not a promise of what your bank will offer, but it is a clean baseline that helps you see the tradeoff between lower initial payments and long-term principal reduction.

Assumptions and how to use this calculator

• Interest-only payment is calculated as loan amount × (annual rate ÷ payments per year). Principal is not reduced during the interest-only period.
• The interest-only period is optional. If you do not enter it, the calculator assumes 5 years to estimate total interest during that phase.
• Monthly extras are optional and default to 0. If you choose weekly or biweekly payments, extras are converted from monthly to a per-payment estimate.
• The repayment comparison assumes a standard amortizing loan with equal monthly payments over the chosen term (default 30 years) using the same interest rate.
• This tool ignores lender fees, rate changes, redraw/offset features, and taxes. Use it for planning and comparison, not for legal or lender-quote accuracy.

Common questions

Why is the interest-only payment lower than a repayment mortgage payment?

A repayment mortgage includes two parts every period: interest and principal. The principal portion reduces your balance over time. An interest-only payment covers only the interest, so it is usually lower at the start. The tradeoff is that you are not building equity through repayment, and your balance remains unchanged during the interest-only period.

Does interest-only mean I pay less interest overall?

Usually no. Because the balance stays the same, the interest is calculated on the full principal for the whole interest-only phase. On a repayment loan, the balance gradually decreases, so the interest portion tends to fall over time. Interest-only can make sense for cash flow or strategy reasons, but it often increases total interest cost unless you invest or repay the principal later in a disciplined way.

What if I do not know the interest-only period?

Leave it blank. The calculator will assume 5 years for the purpose of estimating total interest during the interest-only phase. If you later learn the actual period (for example 3 years or 10 years), you can update the input and see how the total interest estimate changes.

How should I use the “monthly extras” field?

Use it for costs that are separate from the loan but matter for affordability, such as insurance, rates, levies, HOA, or a maintenance allowance. These are not part of your loan payment, but they are part of your housing cash flow. If you pick weekly or biweekly payments, the calculator spreads your monthly extras across the number of payments per year so the “all-in per payment” stays comparable.

When is the repayment comparison not a fair comparison?

It becomes less comparable if your rate will change materially, if your lender uses a different compounding method, or if your interest-only product has conditions that affect pricing or fees. It is also not a fair comparison if you plan to repay principal in lump sums during the interest-only phase. In that case, your actual interest cost could be lower than a pure interest-only scenario.