Interest Only Calculator
See what your payments look like during an interest-only period before principal repayment begins.
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Get in TouchAn interest-only payment covers just the interest on your loan balance — none of it reduces principal — so it's lower than a standard amortizing payment. It's calculated as your loan balance times your monthly interest rate. On a $300,000 loan at 6%, that's $1,500 per month until the interest-only period ends and payments jump to include principal.
How It Works
During an interest-only period, your monthly payment covers only the interest accrued on the loan — none of it reduces the principal balance. This keeps payments low for a set period (commonly 5–10 years on mortgages), after which the loan converts to a standard amortizing schedule and payments increase to cover both principal and interest over the remaining term.
Formula
The interest-only payment is calculated as:
- P — the outstanding loan principal
- r — your monthly interest rate (annual rate ÷ 12)
Example
Say you have a $300,000 loan at a 6% annual interest rate during an interest-only period:
- Monthly interest rate: 6% ÷ 12 = 0.5%
- Interest-only payment: $300,000 × 0.005 = $1,500/month
- Principal balance after the interest-only period: still $300,000
Once the interest-only period ends, that same $300,000 balance amortizes over the remaining term at the same rate — meaning the payment jumps to fully repay the loan on schedule.
Assumptions & Limitations
This calculator assumes a fixed interest rate during the interest-only period and doesn't account for rate adjustments, fees, taxes, or insurance. It also doesn't calculate your post-interest-only payment — for that, use the Loan Payment Calculator with your remaining balance and remaining term. Results are estimates for educational purposes only.
Frequently Asked Questions
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