Interest Only Calculator: The Payment Now, the Payment Later, and the Extra Interest
See the interest-only payment on a loan, what it rises to when principal comes due, and how much more interest it costs than paying the loan down from the start.
On a $400,000 loan at 6.75% for 30 years with the first 10 interest-only, you pay $2,250.00 a month for 10 years, then $3,041.46 a month for the last 20, a rise of $791.46. The same loan paid down from day one costs $2,594.39 a month, and the interest-only version costs $65,965.33 more in interest over the term.
These are estimates from the loan amount, fixed rate and terms you enter; they are not financial advice or a loan offer. Your loan may have a variable rate, fees, escrow for taxes and insurance, and its own rules for when principal comes due, none of which this page models. Ask your lender for the loan's own payment schedule before you sign.
The interest-only period counts toward the term: a 30-year loan with 10 interest-only years repays all the principal in the last 20.
Interest-only payment, first 10 years
$2,250.00
then $3,041.46 a month for 20 years, a rise of $791.46 (35.18%)
- Interest paid in the interest-only years
- $270,000.00
- Total interest, interest-only loan
- $599,948.42
- Standard payment from day one
- $2,594.39
- Total interest, standard loan
- $533,983.09
- Extra interest for paying interest only
- $65,965.33
Fixed rate for the whole term; interest posts monthly to the cent, and the last payment is adjusted to clear the balance ($3,039.48).
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About the Interest Only Calculator
During an interest-only period you pay only the month's interest: the loan amount times the rate divided by 12. None of it reduces what you owe, so when the period ends the whole original balance is still there, and it has fewer years left to be repaid. That is why the payment rises, and why the rise is bigger the longer the interest-only stretch runs. This calculator follows the loan month by month. The calculator rounds each month's interest to the cent before it is charged. After the interest-only years it switches to the standard level payment over the months remaining; with the defaults the final payment is $3,039.48, $1.98 less than the others, so the balance clears exactly. A second set of figures shows the same $400,000 at 6.75% repaid over all 30 years, so the lower early payment can be weighed against $65,965.33 in extra interest. The rate is fixed for the whole term here. If your rate can change, the later payment could be higher or lower than shown.
Frequently asked questions
How is an interest-only payment calculated?+
Loan amount times the annual rate, divided by 12. For $400,000 at 6.75% that is $400,000 x 0.0675 / 12 = $2,250.00 a month. The payment stays the same through the interest-only years because the balance does not move.
How much does the payment go up when the interest-only period ends?+
With the defaults it rises from $2,250.00 to $3,041.46, by $791.46 or 35.18%. The full $400,000 now has to be repaid in 20 years instead of 30, so the new payment is higher than the $2,594.39 a standard 30-year loan would have charged all along.
Does paying interest only cost more in the end?+
Yes, at any rate above zero. The balance stays at its peak for the interest-only years, so interest keeps accruing on all of it. With the defaults the interest-only loan pays $599,948.42 of interest against $533,983.09 for the standard loan, $65,965.33 more, of which $270,000.00 is paid during the first 10 years alone.
Can I pay extra principal during the interest-only years?+
Check your loan agreement to see whether extra principal is allowed during the interest-only years; any principal you do pay lowers both the interest and the later payment. This calculator assumes you pay exactly the interest-only amount; to see the effect of paying down the loan from the start, compare the standard payment row.
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