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Interest-Only Loan Calculator

Calculate monthly payments and interest for loans with an interest-only period.

Loan Term Breakdown

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    Overview

    The Interest-Only Loan Calculator helps you calculate monthly payments and total interest for loans that begin with an interest-only phase before transitioning into full amortization. This is particularly useful for real estate investors, homebuyers, or financial planners evaluating flexible loan repayment strategies.

    Whether you're considering an interest-only mortgage, a buy-to-let investment loan, or exploring options to reduce early cash outflows, this tool provides a comprehensive breakdown of your loan's structure and total cost.

    Formula & Methodology

    The calculator works in two main stages:

    • Interest-Only Period: You only pay interest each month.
    • Amortization Period: You begin repaying the principal along with interest.

    Formulas Used:

    Interest-Only Monthly Payment = (Loan Amount × Annual Interest Rate) / 12
    
    Amortized Monthly Payment = [P × r] / [1 - (1 + r)-n]
    
    Where:
    P = Loan Amount  
    r = Monthly Interest Rate (Annual Rate ÷ 12)  
    n = Number of Amortizing Months
        

    Example

    Suppose you borrow $200,000 at an interest rate of 5% annually, with a 5-year interest-only period followed by a 25-year amortized period.

    • Interest-Only Monthly Payment: $833.33
    • Amortized Monthly Payment (years 6–30): ≈ $1,073.64
    • Total Interest Paid: ≈ $193,092

    Use Cases

    • 🧱 Planning real estate investments with low initial outflows
    • 🏡 Estimating long-term cost of adjustable-rate mortgages (ARM)
    • 📊 Comparing interest-only loans with traditional fixed-rate loans
    • 💼 Structuring loans for clients with variable income streams

    Frequently Asked Questions (FAQ)

    🔍 What is an interest-only loan?

    An interest-only loan allows you to pay only the interest portion for a set period, after which you begin repaying the principal plus interest.

    📉 Are interest-only loans cheaper?

    They offer lower initial payments, but total interest paid over the life of the loan is often higher than traditional loans.

    📆 Can I repay the loan early?

    Yes, but check with your lender for early repayment terms or penalties.

    💰 What happens after the interest-only period ends?

    You begin making larger monthly payments that include both principal and interest, typically via a standard amortization schedule.

    🏠 Is this calculator useful for mortgages?

    Absolutely. It's widely used for interest-only mortgage scenarios and mortgage planning strategies.

    🧮 Does the calculator include taxes or insurance?

    No, it focuses on loan principal and interest only. For full cost estimation, consider additional tools for escrow components.

    📈 Can I visualize the loan structure?

    Yes! The built-in doughnut chart shows the breakdown of interest-only vs. amortization periods.

    🌍 Does this support different currencies?

    Yes. You can select $, €, £, CHF, or ₹ from the dropdown, and results will adjust accordingly.

    🖨 Can I export or print the results?

    Yes. Use the “Print/Export” button to generate a clean printout or PDF.

    🔗 Can I share my loan result?

    Yes. Click “Copy Results” or use one of the social sharing buttons for easy distribution.

    📚 Data & Accuracy

    This tool is based on industry-standard loan amortization models and does not store or transmit your data.