Interest-Only Loan Calculator
Low payments now, a much bigger one later. See both, the size of the jump, and what the interest-only years add to the total cost.
Explain my numbers in plain English
Sends only the numbers shown above (and your question) to an AI model via Vercel AI Gateway. Nothing is stored. It's a plain-language read, not financial advice.
How the balance falls
Why the payment jumps
During the interest-only period the balance doesn't move; the flat line at the start of the chart. When it ends, the whole original balance has to be repaid over fewer years than a normal loan would have, so each payment carries a bigger slice of principal. With 10 interest-only years on a 30-year loan, you're repaying the full amount in 20 years instead of 30.
That payment shock is what the CFPB warns borrowers to plan for. If the plan is to sell or refinance before the reset, check the balance you'll still owe against realistic prices and rates.
Questions people ask
How is an interest-only payment calculated?
Balance × annual rate ÷ 12. On $300,000 at 7%, that is $1,750 a month. None of it reduces the balance.
What happens when the interest-only period ends?
The full balance is amortized over the remaining term, which is shorter than the original, so the payment jumps, often by 30–50% or more. The calculator shows the new payment and the size of the jump.
Do interest-only loans cost more?
Yes, over the full term. You carry the whole balance for longer, so you pay more interest in total than on a fully amortizing loan at the same rate. The comparison shows the difference.
Who uses interest-only loans?
Borrowers with uneven income, investors who expect to sell or refinance, and HELOC draw periods. Under the CFPB’s Qualified Mortgage rules, interest-only mortgages are not QM loans, so fewer lenders offer them.