Interest-Only Mortgage Calculator - Payment Estimate

An interest-only mortgage charges interest on the full principal during a set window and does not amortize the balance. Monthly payments look lower than a fully amortizing loan, which is the product’s appeal and its risk. The interest-only mortgage calculator shows that payment, the annual interest cost, the unchanged balance due at the end of the period, and total interest if the interest-only window runs for the years you enter. Monthly payment is loan amount × annual rate / 12. Annual interest is loan × annual rate. Because no principal is paid, the balance due at the end of the period equals the original loan amount. Total interest is annual interest × years. There is no amortization formula in this phase; when the interest-only period ends, a new fully amortizing payment would be calculated on the remaining balance and remaining term, which is outside this worksheet. A $300,000 loan at 4.5% for five interest-only years costs $1,125.00 per month, $13,500.00 per year, and $67,500.00 of interest over five years, with $300,000 still due. A $200,000 loan at 3% for ten years is $500.00 a month and $60,000.00 of interest, still leaving $200,000 to refinance or amortize. Those totals are why interest-only can be expensive even when the monthly bill looks light. Rates can reset, lenders can require a balloon or a recast, and taxes or insurance are not included. Interest-only products are restricted in some markets and may be limited to investment property or high-equity borrowers. Confirm the reset date, the amortizing payment that follows, and qualification rules with the lender before using a low interest-only payment in a household budget. Budget the reset, not only the teaser payment. After an interest-only window, the same principal must amortize over fewer remaining years, so the fully amortizing payment can jump sharply. The interest-only mortgage calculator keeps that risk visible by repeating the original balance as the amount still due. If you plan to sell or refinance before reset, test a higher rate and a lower sale price. If you plan to stay, ask the lender for the recast payment and add tax and insurance on top.