Interest-Only Mortgage Calculator 2026
Compare interest-only vs fully amortizing mortgage payments, see your total interest cost, and review the year-by-year payment schedule — including exactly when and how much your payment jumps after the interest-only period ends. Free, private, no sign-up.
| Metric | Interest-Only Loan | Standard 30-yr P&I |
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| Year | Monthly Pmt | Principal | Interest | Balance |
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What Is an Interest-Only Mortgage?
An interest-only (IO) mortgage is a home loan where you pay only the interest charges for a set initial period — typically 5 to 10 years — without reducing the loan's principal balance. According to the Consumer Financial Protection Bureau (CFPB), interest-only loans are considered non-qualified mortgages in most cases, meaning lenders must verify you have the ability to repay the loan when the full P&I payment kicks in.
During the IO period your monthly payment is calculated as: Loan Balance × (Annual Rate ÷ 12). Once the IO period expires, the remaining balance is re-amortized over the remaining term — which produces a substantially higher payment, a phenomenon known as payment shock.
Payment Shock: The Biggest Risk of Interest-Only Loans
Payment shock is the sharp, sudden increase in your monthly mortgage payment when the interest-only period ends. For a typical 10-year IO loan on a $400,000 balance at 6.75%, the monthly payment jumps from roughly $2,250 (IO) to approximately $3,100–$3,400 (full P&I) — an increase of 40–50% overnight. Borrowers who do not plan for this increase risk defaulting on their loan.
Key risk factors that amplify payment shock include: choosing a longer IO period, taking the loan at a higher rate, or counting on home-price appreciation to refinance out before the IO period ends. The CFPB warns that this refinancing "exit strategy" can fail when property values decline or when credit conditions tighten.
How Interest-Only Compares to a Standard Mortgage
With a traditional fully amortizing (P&I) mortgage, every payment reduces your principal from day one, building equity steadily. An IO loan offers a lower payment in the early years but leaves your balance completely unchanged during that period — meaning you build zero equity through payments (only through property appreciation). Over the full loan life, IO borrowers typically pay significantly more total interest than borrowers on a standard loan.
Use the comparison table above to see the full picture: IO monthly savings during the initial period, the post-IO payment jump, and total interest paid across both options side by side.
When an Interest-Only Mortgage May Make Sense
IO mortgages can be appropriate in specific financial situations: high-income borrowers with irregular cash flow (business owners, commissioned salespeople) who prefer lower minimum payments and plan to make large principal pay-downs; real estate investors focused on cash flow during a short hold period; or borrowers who expect a significant income increase before the IO period expires. However, these scenarios require disciplined planning. The CFPB recommends borrowers always stress-test their budget at the higher post-IO payment before signing. Last updated: May 2026.