AmortizationTools

Interest-Only Amortization Calculator

Model a loan with an interest-only period: the payment during it, the payment after the reset, and the extra interest it costs.

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Free · No sign-up · Runs in your browser

An interest-only period is an amortisation schedule with the front removed. Nothing is repaid, so the balance at the end of the period is exactly the original loan, and that full balance must then amortise over whatever term remains.

This calculator reports the payment before and after the reset, the size of the jump, and the additional interest the structure costs compared with amortising from the start.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Interest-only payment

$2,250

Payment after reset

$2,686

Payment increase
$436
Balance at reset
$400,000
Interest during the period
$81,000
Total interest
$551,394
Interest if amortising throughout
$533,980
Extra cost of the structure
$17,413

No principal is repaid during the interest-only period, so the balance at reset equals the original loan amount.

The payment jump at reset is the main risk of this structure: the same balance must now amortise over a shorter remaining term.

How to use the interest-only amortization calculator

  1. Enter the loan amount and the interest rate.
  2. Enter the length of the interest-only period.
  3. Enter the full term of the loan.
  4. Compare the two payments and the extra interest cost.

What people use this for

  • Understanding the reset before agreeing to an interest-only period.
  • Planning for an existing interest-only loan approaching its reset.
  • Comparing an interest-only structure against amortising throughout.
  • Evaluating an interest-only investment or bridging facility.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

Three years interest-only

$400,000 at 6.75% with 3 years interest-only inside a 30-year term.

Interest-only payment
$2,250
Payment after reset
$2,686
Payment increase
$436

Ten years interest-only

The same loan with a much longer interest-only period and only twenty years to amortise.

Payment after reset
$3,041
Payment increase
$791
Extra cost of the structure
$65,970

The longer the period, the harder the reset

The two examples make the trade explicit. Three years interest-only leaves twenty-seven to amortise and produces a manageable increase. Ten years leaves twenty, and the payment jump is substantially larger on the same loan at the same rate.

Because no principal has been repaid, the reset payment is always higher than the payment on an equivalent loan that amortised from the start - the same debt now has less time to clear.

No equity from payments

Throughout the interest-only period the balance does not move. Any equity comes from the deposit and from price movement, and if values fall the loan-to-value can be worse at the reset than at the start.

That matters because refinancing at the reset - the usual plan - depends on value as well as on rates and credit. A structure whose exit relies on all three cooperating deserves a second plan.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

  • The interest-only payment is the balance times the periodic rate; no principal is repaid during the period.
  • The reset payment amortises the full original balance over the remaining term.
  • The comparison figure amortises the same loan from day one across the full term.
  • Results are estimates. Real quotes depend on credit, income, property, loan programme and lender pricing at the time of application.
  • Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator is provided for informational and educational purposes only. Results are estimates and may not reflect actual rates, fees, taxes, or market conditions.

This website is not a lender, a mortgage broker or a financial adviser. It does not originate loans, does not accept applications and does not forward your details to anyone.

Actual loan terms depend on credit history, income, the property, the loan programme and lender pricing at the time of application. Only a lender can tell you what you qualify for.

Frequently asked questions

Can I pay principal during the interest-only period?

Most loans allow it, and doing so reduces both the balance and the payment jump. Check the agreement for restrictions.

Why does the reset payment exceed a normal payment?

Because the full balance must clear over a shorter remaining term. Less time for the same debt means a larger payment.

Is interest-only ever cheaper?

Lower per month during the period, higher overall. It buys cash flow at the cost of total interest and of building no equity.

What happens at the reset if I cannot afford it?

The options are refinancing, selling, or negotiating with the lender - none of which are guaranteed. That is why the reset payment should be affordable at the outset, not just the interest-only one.

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