Interest-Only Loan Calculator
Interest-Only Loan Calculator
An interest-only loan structure means your monthly payment covers just the interest accrued that month — none of it reduces the principal balance. This results in a lower monthly payment than a fully amortizing loan of the same size and rate, but the full principal is still owed at the end of the interest-only period.
Real estate investors and some mortgage borrowers use interest-only structures to minimize monthly cash outflow during a specific period, often planning to refinance, sell, or switch to full amortization before the interest-only period ends.
- Principal Never Decreases: Unlike a standard amortizing loan, the balance stays exactly the same each month during the interest-only period.
- Lower Monthly Payment: Interest-only payments are always lower than the equivalent amortizing payment at the same rate, since none goes toward principal.
- Payment Jumps Later: Once the interest-only period ends, the payment typically increases sharply as amortization begins on the full remaining term.
Will I ever pay off the loan with interest-only payments?
No — the principal balance never decreases with pure interest-only payments. The loan is only paid off through a lump-sum payment, refinancing, sale of the asset, or a switch to amortizing payments.
Why would someone choose an interest-only loan?
Common reasons include maximizing near-term cash flow for an investment property, expecting a future income increase, or planning to sell or refinance before amortization begins.
Interest-Only Loan Calculator
An interest-only loan structure means your monthly payment covers just the interest accrued that month — none of it reduces the principal balance. This results in a lower monthly payment than a fully amortizing loan of the same size and rate, but the full principal is still owed at the end of the interest-only period.
Real estate investors and some mortgage borrowers use interest-only structures to minimize monthly cash outflow during a specific period, often planning to refinance, sell, or switch to full amortization before the interest-only period ends.
- Principal Never Decreases: Unlike a standard amortizing loan, the balance stays exactly the same each month during the interest-only period.
- Lower Monthly Payment: Interest-only payments are always lower than the equivalent amortizing payment at the same rate, since none goes toward principal.
- Payment Jumps Later: Once the interest-only period ends, the payment typically increases sharply as amortization begins on the full remaining term.
Will I ever pay off the loan with interest-only payments?
No — the principal balance never decreases with pure interest-only payments. The loan is only paid off through a lump-sum payment, refinancing, sale of the asset, or a switch to amortizing payments.
Why would someone choose an interest-only loan?
Common reasons include maximizing near-term cash flow for an investment property, expecting a future income increase, or planning to sell or refinance before amortization begins.