Interest Only Mortgage Calculator

You’ve heard that an interest-only mortgage can slash your monthly payments by hundreds of dollars. But how much would you actually pay on a €300,000 loan at 6.5%? With the calculator above, you can see the numbers in seconds–no guesswork needed.

The calculator takes your loan amount, annual interest rate, and the length of the interest-only term (usually 5, 7, or 10 years). It instantly shows the constant monthly interest payment you’ll owe during that phase. Because you’re not repaying any principal, the payment remains the same month after month.

Interest-Only Mortgage Basics

An interest-only mortgage separates the loan into two distinct stages. During the first stage–the interest-only period–your monthly payment covers only the interest charged on the full loan balance. You do not reduce the amount you borrowed. The second stage begins when the interest-only term expires. The loan then recasts into a traditional amortizing structure, so you start repaying both principal and interest. This often leads to a sharp payment increase.

For example, a $400,000 loan at 7% results in a monthly interest payment of $2,333.33 during the interest-only phase. Once the full repayment phase kicks in over the remaining 20 years, that same loan might require a monthly payment of about $3,100–a 33% jump.

How Is the Monthly Interest Payment Calculated?

The formula is straightforward:

Monthly Interest Payment = (Loan Amount × Annual Interest Rate) ÷ 12

No amortization is applied because the principal balance doesn’t change. For instance, on a $250,000 loan at 6%:

($250,000 × 0.06) ÷ 12 = $1,250 per month

The calculator above uses exactly this logic. It ignores property taxes, homeowners insurance, and mortgage insurance, so your actual housing cost will be higher.

Interest-Only vs. Traditional Payment Example

The interest-only option saves you about $316 per month early on, but after the recast the payment rises well above the traditional loan’s fixed amount. Whether that trade-off makes sense depends on your financial timeline and risk tolerance.

Advantages and Risks of Interest-Only Loans

Potential advantages:

• Lower initial monthly payments free up cash for investments, renovations, or other expenses.
• May be easier to qualify for if you expect a significant income increase in a few years.
• Works well for short-term ownership–selling or refinancing before the recast avoids the payment spike.

Risks to consider:

• No equity is built during the interest-only period; you rely entirely on home price appreciation.
• The payment jump after recast can be unaffordable if your income hasn’t grown as planned.
• Rising interest rates on adjustable-rate loans can push payments even higher.

This calculator provides estimates for educational purposes only and does not constitute financial advice. Check with a licensed mortgage professional for current 2026 rates and terms.