Does this include escrow or fees?

No. It only models the loan’s interest cost. Add taxes/insurance separately if needed.

What happens after the interest-only period?

You typically refinance or start amortizing the principal. Consult your lender for the exact structure.

Can I make extra payments toward principal during the interest-only period?

Many lenders allow extra principal payments during an interest-only period, but policies vary. This calculator assumes no extra principal reduction; if you plan to prepay, your actual interest cost and remaining balance will be lower.

finance calculator

Interest-Only Loan Calculator

See monthly interest payments and total costs before principal comes due.

Results

Monthly interest payment: $1,250 USD
Total interest during period: $75,000 USD
Interest + principal due: $325,000 USD

Overview

Interest-only mortgages, bridge loans, and construction loans can make monthly payments look deceptively affordable at first—because you are only paying interest and not reducing principal. The trade-off is that your balance doesn’t shrink, and you may face a large payment shock or balloon payoff later.

This interest-only loan calculator helps you see both sides. It shows the monthly interest payment during the interest-only period, how much total interest you’ll pay over that window, and the combined total of interest plus principal that waits at the end of the period.

Use it to sanity-check cash flow, plan for payoff or refinance, and understand the real cost of “low” interest-only payments.

It’s especially useful any time a lender, builder, or broker proposes an interest-only structure as a way to “make the numbers work” on a property: you can quickly see how small the short-term payment really is relative to the lump you are kicking down the road, and decide whether that trade makes sense given your realistic timeline for selling, refinancing, or paying the loan down aggressively.

How to use this calculator

Enter the loan amount (principal) you are borrowing or plan to borrow.
Enter the annual interest rate (APR) as a percentage.
Enter the number of months your loan will be interest-only (for example, 12 months for a short bridge loan, or 60 months for a 5-year IO period).
Review the monthly interest-only payment and total interest you will pay over that period.
Check the total of interest plus principal due at the end of the interest-only period so you know what balance you will still need to refinance, sell, or pay down.
Experiment with different APRs and interest-only durations to see how they affect monthly payments and total interest cost.

Inputs explained

Loan amount: The principal you are borrowing. Interest during the interest-only period is calculated on this full amount, assuming no principal prepayments.
Interest rate (APR): The annual percentage rate on the loan, expressed as a percent. The calculator divides this by 12 to get a monthly rate for interest-only payment calculations.
Interest-only period (months): The number of months during which you will make interest-only payments before principal payments begin or a balloon payoff is due.

Outputs explained

Monthly interest payment: The monthly payment amount during the interest-only period, covering interest only with no reduction to principal.
Total interest during period: The total amount of interest you will pay over the entire interest-only period, assuming the principal balance does not change.
Interest + principal due: The sum of total interest paid during the interest-only period plus the original principal, representing the total cash outlay you will have made plus the amount still owed at the end.

How it works

You enter the loan amount (principal), annual interest rate (APR), and the number of months during which the loan will be interest-only.

The calculator converts the APR to a monthly interest rate by dividing by 12 and then multiplies that rate by the principal to find the monthly interest-only payment.

Total interest during the interest-only period is simply the monthly interest payment multiplied by the number of interest-only months, assuming the principal does not change.

Because you are not paying down principal, the full loan amount is still outstanding at the end of the interest-only period.

The total paid at the end of the period (interest + principal due) is calculated as Total interest during the period plus the original principal amount.

This lets you see both the near-term cashflow benefit (lower monthly payments) and the longer-term cost and payoff obligation you’re building up.

Formula

Monthly interest = Principal × (APR ÷ 12)
Total interest = Monthly × Months

When to use it

Comparing different interest-only bridge loan options while you prepare to sell a property or close on long-term financing.
Projecting cash flow on interest-only construction loans during the build phase before converting to a permanent mortgage.
Understanding how much interest accumulates before you refinance into a fully amortizing loan or reach the end of a teaser period.
Evaluating whether the short-term payment relief from an interest-only period is worth the longer-term cost and payoff risk.
Helping borrowers see how payment shocks can occur when an interest-only period ends and principal amortization begins.
Illustrating the trade-offs between an interest-only period and starting with a fully amortizing schedule for the same principal and rate.

Tips & cautions

Plan early for how you will handle principal repayment after the interest-only period—through sale, refinance, or higher amortizing payments.
Include taxes, insurance, HOA dues, and other costs in a separate budget; this calculator focuses solely on loan principal and interest.
If your loan has a variable rate or a reset after the interest-only period, rerun scenarios with higher APRs to see how your interest cost could increase.
Use the monthly interest-only payment as a stress test for your cash flow, and consider whether you can afford higher payments if rates or amortization kick in.
Ask your lender for detailed amortization or payment schedules for the post interest-only period; this calculator does not model those future payments.
For investment properties, compare the interest-only payment plus other expenses against expected rent to understand your cash-on-cash picture and risk if vacancies occur.
Assumes a fixed interest rate and simple interest on the full principal for the duration of the interest-only period.
Does not include origination fees, points, closing costs, or escrow items such as taxes and insurance.
Does not model partial principal prepayments during the interest-only window; if you intend to pay down principal, results will differ.
Does not calculate post interest-only amortizing payments or balloon payments; it only shows the remaining principal and total interest for the IO period.
Not suitable for complex loan structures such as negative amortization, step-rates, or multi-stage hybrid products without additional modeling.

Worked examples

$250k loan, 6% APR, 60 months

Monthly interest ≈ $1,250
Five-year interest ≈ $75,000
Total due (interest + principal) ≈ $325,000

$500k bridge loan, 8% APR, 12 months

Monthly ≈ $3,333
Interest year ≈ $40,000

Short-term interest-only vs fully amortizing feel

Compare an interest-only payment of $1,200/month on a $240,000 loan at 6% with a hypothetical fully amortizing 30-year payment (~$1,439/month).
The interest-only option saves about $239/month in the short term, but none of that payment reduces principal.
Over 24 months of interest-only, you’d pay roughly $28,800 in interest and still owe $240,000.
Seeing these side-by-side figures can clarify whether the short-term relief is worth the long-term cost and risk.

Deep dive

Model interest-only loans by entering loan amount, APR, and interest-only period length to see monthly interest and total interest costs.

Use this interest-only loan calculator to prepare for balloon payoffs, refinancing decisions, and cash flow planning before principal payments begin.

Pair it with a full mortgage or amortization calculator to compare interest-only structures against standard fixed-rate loans over the same horizon.

FAQs

Does this include escrow or fees?: No. It only models the loan’s interest cost. Add taxes/insurance separately if needed.
What happens after the interest-only period?: You typically refinance or start amortizing the principal. Consult your lender for the exact structure.
Can I make extra payments toward principal during the interest-only period?: Many lenders allow extra principal payments during an interest-only period, but policies vary. This calculator assumes no extra principal reduction; if you plan to prepay, your actual interest cost and remaining balance will be lower.

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This interest-only loan calculator provides simplified estimates of monthly interest payments, total interest during the interest-only period, and the remaining principal balance. It does not replace official loan disclosures, amortization schedules, or lender-specific terms. Real loans may include fees, changing rates, and complex structures. Before choosing or relying on any interest-only financing product, review your loan documents carefully and consult with a qualified mortgage or financial professional.