{
  "id": "interest-only-loan",
  "version": "4d9fc44e2137",
  "status": "published",
  "name": "Interest Only Loan Calculator",
  "question": "What will my interest-only loan cost?",
  "summary": "Computes the interest-only payment, the payment after the interest-only period (or the balloon when the whole term is interest-only), and the extra interest compared with a regular loan.",
  "category": "finance",
  "subcategory": "loans",
  "url": "https://www.acalculator.org/finance/interest-only-loan-calculator",
  "markdown": "https://www.acalculator.org/finance/interest-only-loan-calculator.md",
  "kind": "schedule",
  "method": "Interest-only payment = L × r; later payment = L × r ÷ (1 − (1 + r)^−(n − m)), with r = rate ÷ 1200, n the months in the term, and m the interest-only months; when m = n the loan L is due as a balloon.",
  "assumptions": [
    "The rate is fixed for the whole term and interest is charged monthly at the yearly rate ÷ 12.",
    "Payments are made at the end of each month; the first is one month after the start date.",
    "The term and the interest-only period are rounded to whole months.",
    "After the interest-only months, the level payment repays the whole loan by the end of the term.",
    "Values are not rounded to the cent between months; only the display is rounded."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "amount": {
        "title": "Loan amount",
        "description": "The amount borrowed.",
        "type": "number",
        "x-unit": "USD",
        "exclusiveMinimum": 0,
        "maximum": 100000000
      },
      "rate": {
        "title": "Interest rate",
        "description": "The fixed yearly rate. The monthly rate is this ÷ 12.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 40
      },
      "years": {
        "title": "Loan term (years)",
        "description": "The whole length of the loan in years, interest-only years included; 1.5 is 18 months.",
        "type": "number",
        "exclusiveMinimum": 0,
        "maximum": 40
      },
      "io": {
        "title": "Interest-only period (years)",
        "description": "How many years at the start you pay only the interest. Make it equal to the term for a loan repaid in one balloon.",
        "type": "number",
        "exclusiveMinimum": 0,
        "maximum": 40
      },
      "start": {
        "title": "Loan start date",
        "description": "The day the loan starts. The first payment is one month later.",
        "type": "string",
        "format": "date"
      }
    }
  },
  "outputs": {
    "ioPayment": {
      "label": "Interest-only payment",
      "description": "The monthly payment in the interest-only months: the loan × the yearly rate ÷ 12.",
      "format": "money"
    },
    "laterPayment": {
      "label": "Payment after the interest-only period",
      "description": "The level monthly payment that repays the whole loan over the months left in the term.",
      "format": "money"
    },
    "jump": {
      "label": "Payment rise",
      "description": "How much the monthly payment goes up when the interest-only period ends.",
      "format": "money"
    },
    "balloon": {
      "label": "Balloon at the end",
      "description": "When the whole term is interest-only, the loan amount, due with the last payment.",
      "format": "money"
    },
    "ioInterest": {
      "label": "Interest in the interest-only period",
      "description": "All the interest paid while the payments are interest-only.",
      "format": "money"
    },
    "interest": {
      "label": "Total interest",
      "description": "All the interest over the whole term.",
      "format": "money"
    },
    "paid": {
      "label": "Total paid",
      "description": "The loan amount plus all the interest.",
      "format": "money"
    },
    "regularPayment": {
      "label": "Regular loan payment",
      "description": "The level monthly payment on a regular loan of the same amount, rate, and term.",
      "format": "money"
    },
    "extraInterest": {
      "label": "Extra interest",
      "description": "The total interest minus the interest on the regular loan: what the interest-only months cost.",
      "format": "money"
    },
    "payoff": {
      "label": "Last payment",
      "description": "The month of the last payment, when a start date is given.",
      "format": "month-year"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "amount": 300000,
      "rate": 7,
      "years": 30,
      "io": 10,
      "start": "2026-09-30"
    },
    "outputs": {
      "ioPayment": 1750,
      "laterPayment": 2325.8968068566237,
      "jump": 575.8968068566237,
      "ioInterest": 210000,
      "interest": 468215.2336455897,
      "paid": 768215.2336455897,
      "regularPayment": 1995.9074855375497,
      "extraInterest": 49688.53885207174,
      "payoff": "2056-09-30"
    },
    "text": "A $300,000.00 loan at 7% costs $1,750.00 a month while it is interest-only, and $468,215.23 in interest over the whole term."
  },
  "examples": [
    {
      "given": {
        "amount": 300000,
        "rate": 7,
        "years": 30,
        "io": 10
      },
      "expect": {
        "ioPayment": 1750,
        "laterPayment": 2325.896806856619,
        "jump": 575.8968068566192,
        "interest": 468215.2336455913,
        "regularPayment": 1995.907485537547,
        "extraInterest": 49688.53885207116
      },
      "source": "hand calculation in content.mdx; Python 3 in docs/progress/WP-49/python/term_loans.py; Consumer Financial Protection Bureau, What is an interest-only loan? https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-1917/"
    },
    {
      "given": {
        "amount": 500000,
        "rate": 9,
        "years": 2,
        "io": 2,
        "start": "2026-10-01"
      },
      "expect": {
        "ioPayment": 3750,
        "balloon": 500000,
        "interest": 90000,
        "paid": 590000,
        "payoff": "2028-10-01"
      },
      "source": "hand calculation in content.mdx: 500,000 × 0.09 ÷ 12 = 3,750 a month for 24 months; Consumer Financial Protection Bureau, What is an interest-only loan? https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-1917/"
    },
    {
      "given": {
        "amount": 120000,
        "rate": 0,
        "years": 10,
        "io": 2
      },
      "expect": {
        "ioPayment": 0,
        "laterPayment": 1250,
        "interest": 0,
        "extraInterest": 0
      },
      "source": "hand calculation in content.mdx: at 0% the later payment is 120,000 ÷ 96; Consumer Financial Protection Bureau, What is an interest-only loan? https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-1917/"
    }
  ],
  "sources": [
    "Consumer Financial Protection Bureau, What is an interest-only loan? https://www.consumerfinance.gov/ask-cfpb/what-is-an-interest-only-loan-en-1917/",
    "Regulation Z, 12 CFR 1026.18(g) and 1026.37(c), disclosure of interest-only payments and balloon payments. https://www.consumerfinance.gov/rules-policy/regulations/1026/18/",
    "Amortized loan payment (annuity) formula: S. A. Broverman, Mathematics of Investment and Credit, chapter 3."
  ],
  "related": [
    "commercial-mortgage",
    "construction-loan",
    "amortization",
    "loan"
  ],
  "changelog": []
}