Interest-Only Loan Payment Calculator
During an interest-only period, your monthly payment equals the outstanding principal multiplied by the monthly interest rate: Payment = P * r, where r = APR / 12 / 100. This calculator shows your interest-only payment and compares it to the fully amortizing payment you would have if you were paying down principal. It also shows the amortizing payment that kicks in after the interest-only period ends, so you can prepare for the payment increase.
Interest-only payment formula
IO Payment = P * (APR / 12 / 100). Post-IO: M = P * r * (1+r)^n / ((1+r)^n - 1), where n = remaining months after IO period.
The fully amortizing payment uses the original principal and total term. The post-IO amortizing payment uses the same principal (no reduction during IO) amortized over the remaining years after the IO period ends, which is why it is higher.
Payment shock: why the post-IO payment is higher
Because no principal is paid during the interest-only period, the full original principal must be repaid in the shorter remaining term. For a 30-year loan with a 5-year IO period, you must amortize the full balance over the remaining 25 years rather than 30. Combined with potential rate adjustments on variable-rate IO loans, this can create a significant payment increase that borrowers must plan for in advance.
Frequently asked questions
What is an interest-only loan payment?
An interest-only payment covers only the interest that accrues on the outstanding principal balance each month. No principal is reduced. The formula is: Payment = Principal * (APR / 12 / 100).
When do interest-only periods typically end?
Most interest-only loan structures have a fixed period (typically 5 to 10 years) after which the loan converts to a fully amortizing schedule. Once the interest-only period ends, payments increase significantly because you must now pay off the full principal in the remaining term.
Are interest-only loans risky?
Yes, for most borrowers. Because principal is not reduced during the interest-only period, you build no equity through payments, and the payment shock when the loan converts can be severe. The CFPB cautions that interest-only features can lead to difficulty affording payments after the period ends.
Are interest-only mortgages a qualified mortgage under CFPB rules?
No. Under the CFPB's Qualified Mortgage (QM) rules, interest-only features generally disqualify a loan from QM status, except under certain temporary or GSE-eligible exceptions. This means fewer lender protections apply.
What is the amortizing payment after the interest-only period?
After the interest-only period, the remaining principal is amortized over the remaining term using the standard formula M = P * r * (1+r)^n / ((1+r)^n - 1). Because the original principal is unchanged, the payment is higher than if the loan had been amortizing from the start.
Official sources
- CFPB: What is an interest-only loan?
- CFPB Qualified Mortgage Rule (12 CFR 1026.43): Regulation Z Section 43.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.