Interest-only mortgage calculator with the payment after reset
During the interest-only years you pay only the interest: loan × rate ÷ 12. On $400,000 at 6.5% that is $2,166.67 a month. When a 10-year interest-only period ends, the full balance is repaid over the 20 years left, so the payment rises to $2,982.29, an increase of $815.63.
Inputs used by this calculator
Interest-Only Mortgage Calculator uses the fields below. The starting values reproduce the page example; replace them with values from the same units and time period before using the result.
| Input | Starting example | Accepted value | How it is used |
|---|---|---|---|
| Loan amount ($) | 400,000 | 1000 to 1000000000 | Supplies the loan amount ($) quantity used by the published equation or result breakdown. |
| Interest rate (%) | 6.5 | 0 to 30 | Supplies the interest rate (%) quantity used by the published equation or result breakdown. |
| Loan term (years) | 30 | 2 to 50 | Supplies the loan term (years) quantity used by the published equation or result breakdown. |
| Interest-only period (years) | 10 | 1 to 49 | Supplies the interest-only period (years) quantity used by the published equation or result breakdown. |
How an interest-only mortgage works
For a set number of years, usually 5, 7 or 10, the monthly payment covers only the interest charged that month. The loan balance does not go down unless you pay extra. After that period the loan converts to regular principal-and-interest payments for the rest of the term.
The payment during the interest-only years
Multiply the balance by the annual rate and divide by 12. Because the balance never falls, the interest charge is the same every month on a fixed-rate loan. Extra principal payments lower the balance and therefore lower the next interest-only payment.
interest-only payment = balance × annual rate ÷ 12The payment after reset
At the end of the interest-only period the original balance still has to be repaid, but over fewer years than a standard mortgage. On a 30-year loan with 10 interest-only years, $400,000 is amortized over 20 years instead of 30. That is why the reset payment ($2,982.29) is higher than both the interest-only payment and the ordinary 30-year payment ($2,528.27).
payment = P × r ÷ [1 − (1 + r)^−n]n = (term − interest-only years) × 12What the interest-only period costs
Paying no principal for years means interest is charged on the full balance for longer. With the starting values, total interest is $575,750 against $510,178 on a fully amortizing 30-year loan at the same rate. The calculator shows the difference so the lower early payment can be weighed against it.
Qualified Mortgage and lender rules
The CFPB lists an interest-only period among the risky features a Qualified Mortgage cannot have, so these loans are usually non-QM or jumbo products with stricter terms. Under the federal ability-to-repay rule, lenders generally have to consider the fully amortizing payment, not just the lower interest-only payment, when deciding whether you can afford the loan.
When people use one, and the risks
Borrowers with irregular income, investors who plan to sell or refinance, and buyers expecting a large future payment sometimes choose an interest-only period. The risks are the payment jump at reset, no equity built from payments, and the chance that home values fall or rates rise before a planned refinance. Many interest-only loans are adjustable-rate, which can raise the reset payment further.
$400,000 at 6.5% for 30 years
| Loan type | Payment at first | Payment after reset | Total interest |
|---|---|---|---|
| 5-year interest-only | $2,166.67 | $2,700.83 | $540,249 |
| 7-year interest-only | $2,166.67 | $2,796.26 | $553,767 |
| 10-year interest-only | $2,166.67 | $2,982.29 | $575,750 |
| Fully amortizing 30-year | $2,528.27 | No reset | $510,178 |
Frequently asked questions
How do you calculate an interest-only mortgage payment?
Multiply the loan balance by the annual interest rate and divide by 12. $400,000 at 6.5% is $26,000 a year, or $2,166.67 a month.
What happens when the interest-only period ends?
The loan starts amortizing: the full balance is repaid with principal and interest over the years left in the term, so the monthly payment goes up.
Does an interest-only loan cost more in total?
Yes, at the same rate and term, because the balance stays at its highest level for longer and interest is charged on it the whole time.
Can I pay principal during the interest-only period?
Usually yes. Extra payments reduce the balance, which lowers the interest-only payment and the payment after reset. Check the note for prepayment penalties.
Is an interest-only mortgage a Qualified Mortgage?
No. The CFPB lists an interest-only period as a feature a Qualified Mortgage cannot have.
Do interest-only loans include taxes and insurance?
The lender may collect escrow for them, but this calculator shows principal and interest only. Add taxes, insurance and any HOA dues for the full monthly cost.
What is a 10/1 interest-only ARM?
An adjustable-rate loan with a fixed rate and interest-only payments for 10 years, after which the rate can change once a year. This calculator assumes the rate stays fixed.
What to keep in mind
Principal and interest only, at a fixed rate. Property taxes, insurance, HOA dues, mortgage insurance and rate adjustments on adjustable interest-only loans are not included.
Results are rounded for display in US format, with money in dollars and cents; CSV exports keep full calculation precision. This is a calculation summary, not an official certificate.