OneTaskBy Tim King · Updated
Interest-Only Mortgage Calculator
Interest Only Home Loan Repayments and the Jump When the Period Ends
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How the Interest-Only Mortgage Calculator works
This interest-only mortgage calculator works out the monthly payment on an interest only mortgage or loan: the balance times the yearly rate, divided by 12. 200,000 at 4.5% is 750 a month, and the full 200,000 is still owed at the end. Enter the loan, the rate and the interest-only period to see that payment, the higher repayment once the loan switches to capital and interest, and how much extra interest the interest-only years cost. It works in pounds, dollars or euros, for UK interest-only mortgages and home loans elsewhere.
Interest-only mortgage calculator formula
During the interest-only period you pay only the interest, so the balance does not fall:
Interest-only repayment = loan × rate ÷ 12 Repayment afterwards = the principal-and-interest repayment on the full loan over the years left
Because the whole loan must then be repaid over a shorter time, the later repayment is higher than a principal-and-interest loan over the full term, and total interest is higher too.
Worked example: five years interest only
A 500,000 loan at 6.5% over 30 years with 5 years interest only costs 2,708.33 a month to start. After 5 years it rises to 3,376.04 a month, a jump of 667.70. Principal and interest from day one would be 3,160.34 a month, and the interest-only loan costs 37,588.30 more interest overall.
Worked example: three years interest only
A 700,000 loan at 6% over 30 years with 3 years interest only starts at 3,500.00 a month, then rises to 4,367.90, a jump of 867.90. Principal and interest from day one would be 4,196.85, and the interest-only period adds 30,331.46 of interest.
Interest-only repayment reference table
Monthly repayments at 6%: interest only, principal and interest over 30 years, and principal and interest over 25 years after 5 years interest only.
| Loan | Interest only at 6% | P&I over 30 years | P&I over 25 years after 5 IO |
|---|---|---|---|
| 300,000 | 1,500.00 | 1,798.65 | 1,932.90 |
| 350,000 | 1,750.00 | 2,098.43 | 2,255.05 |
| 400,000 | 2,000.00 | 2,398.20 | 2,577.21 |
| 450,000 | 2,250.00 | 2,697.98 | 2,899.36 |
| 500,000 | 2,500.00 | 2,997.75 | 3,221.51 |
| 550,000 | 2,750.00 | 3,297.53 | 3,543.66 |
| 600,000 | 3,000.00 | 3,597.30 | 3,865.81 |
| 650,000 | 3,250.00 | 3,897.08 | 4,187.96 |
| 700,000 | 3,500.00 | 4,196.85 | 4,510.11 |
| 750,000 | 3,750.00 | 4,496.63 | 4,832.26 |
| 800,000 | 4,000.00 | 4,796.40 | 5,154.41 |
| 850,000 | 4,250.00 | 5,096.18 | 5,476.56 |
| 900,000 | 4,500.00 | 5,395.95 | 5,798.71 |
| 950,000 | 4,750.00 | 5,695.73 | 6,120.86 |
| 1,000,000 | 5,000.00 | 5,995.51 | 6,443.01 |
| 1,050,000 | 5,250.00 | 6,295.28 | 6,765.16 |
| 1,100,000 | 5,500.00 | 6,595.06 | 7,087.32 |
| 1,150,000 | 5,750.00 | 6,894.83 | 7,409.47 |
| 1,200,000 | 6,000.00 | 7,194.61 | 7,731.62 |
| 1,250,000 | 6,250.00 | 7,494.38 | 8,053.77 |
Quick answers
- Interest only on 100,000 at 6% is 500 a month.
- The balance does not fall during the interest-only period.
- The jump when it ends is often 20 to 30%.
- Longer interest-only periods mean bigger jumps and more interest.
- Extra payments during the period reduce the balance and the later repayment.
- An interest-only period cuts how many years are left to repay the principal, which is why repayments jump when it ends.
Sources: Mortgage calculator formula.
Checked against: 500,000 at 6.5% interest only = 2,708.33 a month
FAQ
How do I calculate an interest-only mortgage payment?
Multiply the loan by the annual interest rate and divide by 12. A loan of 200,000 at 4.5% costs 200,000 × 0.045 ÷ 12 = 750 a month. Nothing comes off the balance, so the payment stays the same until the rate changes or the interest-only period ends.
Why choose an interest-only loan?
Lower repayments for a time, often for an investment property where cash flow matters, or to free up money during a short period such as parental leave. The cost is more interest overall.
What happens when the interest-only period ends?
The loan switches to principal and interest over the years remaining. You can budget for the higher repayment, refinance, or ask the lender to extend the interest-only period, which they may decline.
Does an offset account help an interest-only loan?
Yes. Money in an offset reduces the interest charged, which lowers the interest-only repayment directly. An offset of 50,000 on a 500,000 loan cuts the repayment by a tenth.
See also: all Property tools, Pay, Bills, Debt, Investing, Saving.
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