# 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.

- Calculator id: `interest-only-loan` · Category: Finance (`finance`) · Tool name: `calculate_interest_only_loan`
- Canonical page: https://tttkmbb.com/finance/interest-only-loan · This document: https://tttkmbb.com/finance/interest-only-loan.md · JSON definition: https://tttkmbb.com/finance/interest-only-loan.json

## Purpose

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.

**Use when:** 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.

## Input

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

## Output

| Field | 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. |

## 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.

## Data Sources

- CFPB – What is an "interest-only" loan? — https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-101/ (government, retrieved 2026-09-24)
- Wikipedia – Interest-only loan — https://en.wikipedia.org/wiki/Interest-only_loan (reference, retrieved 2026-09-24)
- Wikipedia – Amortization calculator (annuity payment formula) — https://en.wikipedia.org/wiki/Amortization_calculator (reference, retrieved 2026-09-24)

Data freshness: `static`. Deterministic formula with fixed constants; results never go stale. Inputs supplied by the caller determine the output.

## API

- `GET https://tttkmbb.com/api/v1/calculate/interest-only-loan?loan_amount=…&interest_rate_percent=…&interest_only_years=…`
- `POST https://tttkmbb.com/api/v1/calculate/interest-only-loan` with JSON body `{"inputs": {…}}`
- Response: unified envelope (`success`, `request`, `result.values`, `result.units`, `sources`, `freshness`, `timestamp`, `next_actions`, `links`); see https://tttkmbb.com/docs/response-format.md
- Schema: https://tttkmbb.com/api/v1/calculators/interest-only-loan · OpenAPI operationId `calculate_interest_only_loan` in https://tttkmbb.com/openapi.json
- Authentication: none. Rate limit: fair use, see https://tttkmbb.com/docs/rate-limits.md.

## MCP

- Server: `https://tttkmbb.com/mcp` (Streamable HTTP, JSON-RPC 2.0, no auth)
- Tool:  `run_calculator` with `{"calculator_id": "interest-only-loan", "inputs": {…}}`

## Example

- 400,000 at 5 %, 5 years interest-only, 30-year term: inputs `{"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: inputs `{"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
```

## Limitations

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. 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. All values are computed from the formula above; no measurement or live data is involved.

## 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

- [Loan Payment Calculator](https://tttkmbb.com/finance/loan-payment.md) — Amortizing payment for any balance, rate and term.
- [Balloon Loan Calculator](https://tttkmbb.com/finance/balloon-loan.md) — Lump-sum repayment instead of amortization after the initial period.
- [Amortization Schedule Calculator](https://tttkmbb.com/finance/amortization-schedule.md) — Principal and interest split of the amortizing phase.