LoanComparisonTools

Interest-Only Loan Calculator

See what an interest-only period costs: the payment before and after the reset, and the extra interest compared with amortising from the start.

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Free · No sign-up · Runs in your browser

An interest-only period lowers the payment by not repaying any of the debt. The balance at the end of it is exactly what it was at the start, and the same balance then has to amortise over a shorter remaining term.

This calculator reports both payments and the size of the jump between them, along with the extra interest the structure costs compared with amortising from the beginning.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Interest-only payment

$1,625

Payment after reset

$2,026

Payment increase at reset
$401
Balance at reset
$300,000
Interest during the period
$97,500
Total interest
$405,186
Interest if amortising throughout
$382,632
Extra interest cost
$22,554

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 loan calculator

  1. Enter the loan amount and the 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.

What people use this for

  • Understanding the payment jump before agreeing to an interest-only period.
  • Comparing an interest-only structure against amortising from the start.
  • Planning for the reset date on an existing interest-only loan.
  • Evaluating an interest-only bridging or investment facility.

Worked examples

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

A five-year interest-only period

$300,000 at 6.5% with 5 years interest-only inside a 30-year term.

Interest-only payment
$1,625
Payment after reset
$2,026
Payment increase at reset
$401

A ten-year interest-only period

The same loan with a longer interest-only period and a shorter amortising remainder.

Payment after reset
$2,237
Total interest
$431,813
Extra interest cost
$49,181

The reset is the whole risk

At the end of the interest-only period the full original balance must amortise over the remaining term. A five-year period inside a thirty-year loan leaves twenty-five years; a ten-year period leaves twenty, and the payment jumps considerably further.

Because nothing has been repaid, there is also no equity built from payments during the period. If values fall, refinancing at the reset may not be available on the terms assumed when the loan was taken.

When it is a legitimate structure

Interest-only makes sense where income is genuinely lumpy, where a property is being held for a defined period, or where the borrower has a specific plan for the balance - a sale, a maturing investment, an expected windfall.

It is a poor structure where it is being used simply to afford a payment. That is a signal the loan is too large, and the reset arrives with the same problem multiplied.

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. Nothing is repaid during the period.
  • The payment after reset amortises the full original balance over the remaining term.
  • The comparison figure amortises the same loan from day one over 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

Does the balance fall during the interest-only period?

No. That is the defining feature: only interest is paid, so the balance at the reset equals the original loan.

Can I make principal payments anyway?

Most interest-only loans allow it, and doing so reduces both the balance and the payment jump at reset. Check the agreement for restrictions.

Can I refinance before the reset?

Sometimes, and it depends on rates, credit and value at that future date. Relying on it is the main risk in the structure.

Is interest-only cheaper?

No. It is lower cost per month during the period and higher cost overall, because interest is charged on an undiminished balance for longer.

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