Interest-Only Mortgage Calculator

Calculate the monthly payment on an interest-only mortgage and the payment shock when it converts. Free IO mortgage calculator.

An interest-only mortgage lets you pay only the interest on the loan for a set period — typically 5, 7, or 10 years — before the loan converts to a standard amortizing payment. During the interest-only period your monthly payment is lower, but none of it reduces the principal, so you build no equity unless the home appreciates. The real cost shows up at conversion: when the loan starts amortizing the remaining balance over the remaining term, the payment jumps to cover both principal and interest over a shorter schedule. That jump is called payment shock. Use this calculator to see the interest-only payment, the post-conversion amortizing payment, and the payment shock in both dollars and percent before you commit to an IO loan. It is useful for borrowers with irregular income, real-estate investors, or anyone weighing the lower upfront payment against the bigger payment later. Enter your loan amount, interest rate, interest-only period, and amortizing term. Everything runs in your browser.

loan

Result

2,166.67

Breakdown

Payment after conversion
2,982.29
Monthly payment shock
815.63
Payment shock (%)
38 %
Interest paid in IO period
260,000

About Interest-Only Mortgage Calculator

What is interest-only mortgage calculator?

An interest-only mortgage lets you pay only the interest on the loan for a set period — typically 5, 7, or 10 years — before the loan converts to a standard amortizing payment. During the interest-only period your monthly payment is lower, but none of it reduces the principal, so you build no equity unless the home appreciates. The real cost shows up at conversion: when the loan starts amortizing the remaining balance over the remaining term, the payment jumps to cover both principal and interest over a shorter schedule. That jump is called payment shock. Use this calculator to see the interest-only payment, the post-conversion amortizing payment, and the payment shock in both dollars and percent before you commit to an IO loan. It is useful for borrowers with irregular income, real-estate investors, or anyone weighing the lower upfront payment against the bigger payment later. Enter your loan amount, interest rate, interest-only period, and amortizing term. Everything runs in your browser.

How to use this calculator

  1. Enter your loan amount.
  2. Enter your interest rate.
  3. Enter your interest-only period.
  4. Enter your amortizing term (after io).
  5. Click the "Calculate" button.
  6. View your result instantly — the main result is displayed prominently at the top with a detailed breakdown below it.

When to use this calculator

  • Comparing an interest-only payment against a fully amortizing payment
  • Estimating the payment shock when an IO loan converts
  • Budgeting for the post-conversion payment before it hits
  • Weighing an IO mortgage for an investment property you plan to sell early
  • Seeing how the IO period shifts total interest versus a standard mortgage

How the calculation works

The interest-only monthly payment is the loan balance times the monthly interest rate: M_io = P x (annual rate / 12), since none of the payment touches principal. After the IO period, the loan amortizes the same balance over the amortizing term at the same rate, using the standard formula M = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly rate, and n is the number of payments in the amortizing term. Payment shock is M_amortizing minus M_io. For example, a $400,000 loan at 6.5% with a 10-year IO period and 20-year amortizing term: M_io = 400,000 x (6.5 / 100 / 12) = $2,167/month. After conversion, r = 0.005417, n = 240, M = 400,000 x [0.005417 x (1.005417)^240] / [(1.005417)^240 - 1] ~= $2,980/month — a payment shock of about $813, or roughly 38%.

Frequently Asked Questions

How is an interest-only mortgage payment calculated?▼
The interest-only payment is the loan balance times the monthly interest rate: P x (annual rate / 12). None of it goes to principal during the interest-only period, so the balance stays the same until the loan begins amortizing.
What happens when an interest-only mortgage converts?▼
After the interest-only period ends, the loan amortizes the remaining balance over the rest of the term at the same rate. The new payment jumps because you now pay both principal and interest over a shorter remaining schedule — this increase is called payment shock.
What is payment shock?▼
Payment shock is the jump in your monthly payment when an interest-only loan switches to amortizing. This calculator shows both the new payment and the percentage increase so you can see the shock before you sign.
Is an interest-only mortgage a good idea?▼
It can work for borrowers with irregular income, real-estate investors, or people who plan to sell or refinance before the IO period ends. The risk is payment shock at conversion and that you build no equity during the interest-only years.
Do you pay down principal during the interest-only period?▼
No. During the interest-only period every payment covers only interest, so the loan balance does not drop unless you make extra principal payments. Principal only begins when the loan starts amortizing.
How is the post-conversion (amortizing) payment calculated?▼
It uses the standard amortization formula M = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the remaining balance, r is the monthly rate, and n is the number of payments left in the amortizing term.
Can I refinance before the interest-only period ends?▼
Yes. Many borrowers refinance or sell before the IO period ends to avoid payment shock. This calculator's payment-shock figure helps you see exactly what you'd be moving away from.
Is this interest-only mortgage calculator free?▼
Yes, this calculator is free and runs entirely in your browser. Enter your loan amount, rate, interest-only term, and amortizing term to see the IO payment and the post-conversion payment shock.

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