Tools
Interest-only mortgage calculator.
The payment while you pay interest only, the payment once principal is due, and both beside a fully amortizing loan.
Loan amount $3,200,000
- Payment, years 1–10
- $16,266.67a month: the loan × the rate ÷ 12
- Payment, years 11–30
- $23,110.79a month, 42% higher
- A fully amortizing payment over the same term
- $19,391.83
- Balance after 10 years, interest only
- $3,200,000
- Balance after 10 years, amortizing
- $2,685,061
- Total interest, interest-only loan
- $4,298,589
- Total interest, amortizing loan
- $3,781,060
The interest-only payment depends on the loan and the rate alone, so it is the same at any term. The later payment repays the whole loan in the years that remain, which is why a plan for it is made at the start. Lenders generally qualify you on the later payment.
How it works
The interest-only payment
Loan amount multiplied by the annual rate, divided by twelve. The balance is unchanged through the interest-only period.
The payment afterward
When the interest-only period ends, the whole loan is repaid over the years that remain. Fewer years to repay the same balance means a higher payment.
Total interest
The calculator shows total interest for both loans at the same rate, side by side.
Questions
How is an interest-only mortgage payment calculated?
Multiply the loan amount by the annual interest rate and divide by twelve. On a $3,200,000 loan at 6.1% that is $16,266.67 a month.
What happens when the interest-only period ends?
The loan begins to amortize over the remaining term, so the payment rises. On a 30-year loan that is interest only for 15 years, the later payment is about two-thirds higher than the first.
How does total interest compare with an amortizing loan?
Interest is paid on the full balance during the interest-only years. The calculator shows both totals side by side.
Who are interest-only mortgages for?
Borrowers with substantial assets or uneven income who value a lower payment now and have a plan for the later payment. Lenders generally qualify you on the later payment.
By qualification
Find out if it is open to you.
Three ranges tell you where you stand against the published criteria. If you meet them, Kent Chesley will speak with you personally.
Prefer to talk? Call him directly at 949-293-8686.