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Interest-Only Loan Calculator

Computes the payments of an interest-only loan: the interest-only monthly payment during the initial period, the higher amortizing payment that repays the full principal over the remaining term, the interest paid in each phase and the extra cost versus a fully amortizing loan.

When to use

You need the monthly payment during and after the interest-only period of a mortgage or HELOC-style loan, the payment jump at the end of the IO period, or the total interest of the structure.

Do not use when: The loan amortizes from the first payment (use loan-payment), or the principal is due as a lump sum instead of being amortized after the IO period (use balloon-loan). Informational; not financial advice.

Formula

i = interest_rate_percent / 1200; m = 12 × interest_only_years; n = 12 × (total_term_years − interest_only_years); io_payment = P × i; amortizing_payment = P × i / (1 − (1 + i)^−n); interest_io = io_payment × m; interest_amort = amortizing_payment × n − P; total_interest = interest_io + interest_amort; total_cost = P + total_interest; increase = (amortizing_payment − io_payment) / io_payment × 100

Fixed rate in both phases, end-of-month payments, no principal prepayments during the IO period. Real interest-only products often reset to an adjustable rate after the IO period, so the amortizing payment can differ from this estimate.

Inputs

Parameter	Type	Unit	Required	Description
`loan_amount`	number		yes	Principal borrowed; unchanged during the interest-only period. Range: > 0, ≤ 1000000000000
`interest_rate_percent`	number	%	yes	Fixed nominal annual rate in percent, assumed the same in both phases; the monthly rate is this / 12. Range: > 0, ≤ 100
`interest_only_years`	number	years	yes	Years during which only interest is paid; must be shorter than total_term_years. Range: > 0, ≤ 40
`total_term_years`	number	years	default 30	Total loan term including the interest-only period; the principal is amortized over the remaining years. Range: > 0, ≤ 100

Outputs

Output	Type	Unit	Description
`interest_only_monthly_payment`	number		loan_amount × interest_rate_percent / 1200.
`amortizing_monthly_payment`	number		Level payment that repays loan_amount over the remaining term after the IO period.
`payment_increase_percent`	number	%	(amortizing − interest-only payment) / interest-only payment × 100.
`interest_during_io_period`	number		interest_only_monthly_payment × 12 × interest_only_years.
`interest_during_amortization`	number		amortizing_monthly_payment × remaining months − loan_amount.
`total_interest`	number		Interest of both phases.
`total_cost`	number		loan_amount + total_interest.
`fully_amortizing_monthly_payment`	number		Level payment of a standard loan amortized over total_term_years from the start.
`extra_interest_vs_fully_amortizing`	number		total_interest − interest of the fully amortizing loan over the same total term.

Example

400,000 at 5 %, 5 years interest-only, 30-year term: {"loan_amount":400000,"interest_rate_percent":5,"interest_only_years":5,"total_term_years":30} → {"interest_only_monthly_payment":1666.67,"amortizing_monthly_payment":2338.36,"payment_increase_percent":40.3,"interest_during_io_period":100000,"interest_during_amortization":301508.05,"total_interest":401508.05,"total_cost":801508.05,"fully_amortizing_monthly_payment":2147.29,"extra_interest_vs_fully_amortizing":28484.91}

250,000 at 6.5 %, 10 years interest-only, 30-year term: {"loan_amount":250000,"interest_rate_percent":6.5,"interest_only_years":10,"total_term_years":30} → {"interest_only_monthly_payment":1354.17,"amortizing_monthly_payment":1863.93,"payment_increase_percent":37.64,"interest_during_io_period":162500,"interest_during_amortization":197343.88,"total_interest":359843.88,"total_cost":609843.88}

GET https://tttkmbb.com/api/v1/calculate/interest-only-loan?loan_amount=400000&interest_rate_percent=5&interest_only_years=5&total_term_years=30

Machine access

API: GET https://tttkmbb.com/api/v1/calculate/interest-only-loan (query parameters) or POST with a JSON body {"inputs": {...}}
Schema: https://tttkmbb.com/api/v1/calculators/interest-only-loan · Markdown: https://tttkmbb.com/finance/interest-only-loan.md · JSON definition: https://tttkmbb.com/finance/interest-only-loan.json
MCP: server https://tttkmbb.com/mcp, tool run_calculator with calculator_id="interest-only-loan"
OpenAPI operationId: calculate_interest_only_loan
Freshness: static. Authentication: none. Rate limit: fair use (see rate limits).

Sources

CFPB – What is an "interest-only" loan? (government)
Wikipedia – Interest-only loan (reference)
Wikipedia – Amortization calculator (annuity payment formula) (reference)

FAQ

Why does the payment jump so much after the IO period?

The full principal must now be repaid over the shorter remaining term: 400,000 over 25 instead of 30 years at 5 % costs 2,338 per month instead of 1,667, a 40 % increase.

Is an interest-only loan more expensive overall?

At the same rate, yes: no principal is repaid during the IO period, so interest accrues on the full balance for longer. Here the structure costs 28,485 more than a 30-year amortizing loan.

Does the calculator handle a rate change after the IO period?

No. Enter the expected post-IO rate separately in loan-payment with the remaining term to see the amortizing payment under a different rate.

Related calculators

Loan Payment Calculator — Amortizing payment for any balance, rate and term.
Balloon Loan Calculator — Lump-sum repayment instead of amortization after the initial period.
Amortization Schedule Calculator — Principal and interest split of the amortizing phase.