Interest-Only Mortgage Calculator
Calculate your monthly payments and compare interest-only loans to traditional mortgages. See how much you can save during the interest-only period.
Unlock Your Results
Enter your email to view your personalized interest-only analysis and receive a detailed PDF report.
An interest-only mortgage allows you to pay only the interest portion of your loan for a set period (typically 5-10 years). During this time, your monthly payments are significantly lower because you're not paying down the principal balance.
After the interest-only period ends, your loan converts to a fully amortizing loan, and your payments increase to include both principal and interest for the remaining term.
Benefits of Interest-Only Loans
- Lower initial payments: Free up cash flow for investments or other expenses
- Flexibility: Ideal for borrowers with variable income or expecting income growth
- Investment opportunities: Use the savings to invest in appreciating assets
- Tax advantages: Interest payments may be tax-deductible (consult your tax advisor)
Who Should Consider Interest-Only Loans?
- Real estate investors looking to maximize cash flow
- Self-employed professionals with variable income
- High-net-worth individuals with sophisticated financial strategies
- Borrowers planning to sell or refinance before the IO period ends
What happens after the interest-only period ends?
Your loan converts to a fully amortizing loan, and your monthly payment increases to include both principal and interest. The payment is calculated to pay off the remaining balance over the remaining term.
Can I make principal payments during the IO period?
Yes! Most interest-only loans allow you to make additional principal payments at any time without penalty. This can help reduce your balance and lower your payment after the IO period.
Are interest-only loans riskier than traditional mortgages?
They can be if not used strategically. The main risks are payment shock when the IO period ends and the lack of equity buildup. However, for sophisticated borrowers with a clear financial strategy, they can be an excellent tool.
What credit score do I need for an interest-only loan?
Most lenders require a minimum credit score of 680-700 for interest-only loans, with some programs requiring 720+. Higher scores typically qualify for better rates.