About the Interest Only Mortgage Calculator
An interest-only (IO) loan lets you pay just the interest for a set period — commonly used by investors — before switching to standard principal-and-interest (P&I) repayments for the remainder of the term. This calculator shows both repayment amounts and the total interest cost over the life of the loan.
How it works
- During the interest-only period, the monthly repayment is simply the loan balance multiplied by the monthly interest rate — the balance doesn't reduce.
- Once the IO period ends, the full original loan balance is repaid as principal-and-interest over the remaining term, using the standard amortisation formula.
- Total interest is the sum of interest paid during the IO period plus the interest paid during the P&I phase.
Assumptions and behaviour
- Assumes the loan balance doesn't reduce at all during the interest-only period (no extra repayments).
- Assumes a fixed interest rate for the full loan life, and that the loan converts to P&I automatically at the end of the IO period.
- The P&I repayment is calculated over the remaining term only (total term minus IO period), which is why it's noticeably higher than a standard P&I loan from day one.
Limitations
- Doesn't model rate changes, IO extensions, or partial principal reductions during the IO period.
- Real lenders may reprice or restrict interest-only terms — availability and pricing vary by lender and loan purpose (investment vs owner-occupier).
- This is general information only, not financial or tax advice.
Privacy
The calculation runs entirely in your browser. Nothing is uploaded or stored.
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