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Is an interest-only mortgage worth it?

See your interest-only payment, how much it jumps when the interest-only years end, and what the loan costs compared with a regular mortgage.

Your numbers

An example rate, not today’s rate. Use the rate your lender quotes.
Often 5, 7, or 10 years.
Interest-only payment
$2,166.67

A $400,000.00 interest-only mortgage at 6.5% costs $2,166.67 a month for 10 years, then $2,982.29 a month.

Payment after the interest-only period
$2,982.29
Payment rise
$815.63
Total interest
$575,750.21
Regular loan payment
$2,528.27
Regular loan interest
$510,177.95
Extra interest from interest-only
$65,572.26
Total paid
$975,750.21
First higher payment
October 2036
Months
360

Answer for the example date Wednesday, September 30, 2026. It changes to today's date when the page loads.

Interest-only payment: $2,166.67. A $400,000.00 interest-only mortgage at 6.5% costs $2,166.67 a month for 10 years, then $2,982.29 a month.

How does the balance fall compared with a regular loan?

Where does each year of payments go?

What does every payment look like?

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes the interest-only payment, the higher payment after the interest-only period, and the extra interest compared with a regular fixed-rate mortgage of the same amount and term.

Example with the default inputs (Loan amount $400,000.00, Interest rate 6.5%, Loan term (years) 30, Interest-only period (years) 10, Loan start date September 30, 2026) on the example date Wednesday, September 30, 2026: A $400,000.00 interest-only mortgage at 6.5% costs $2,166.67 a month for 10 years, then $2,982.29 a month.

Method: interest-only payment = L × r; later payment = L × r ÷ (1 − (1 + r)^−(n − m)), with L the loan, r the rate ÷ 12, n the months, and m the interest-only months.

  • The rate is fixed for the whole term, and interest is charged monthly at the yearly rate ÷ 12.
  • In the interest-only years the balance does not fall; afterwards the whole loan is repaid over the months left.
  • The first payment is one month after the start date; nothing is rounded between months.
  • Property tax, insurance, and fees are not included.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Loan amount $400,000.00, Interest rate 6.5%, Loan term (years) 30, Interest-only period (years) 10 gives Interest-only payment $2,166.67, Payment after the interest-only period $2,982.29, Total interest $575,750.21, Regular loan payment $2,528.27, Extra interest from interest-only $65,572.26.Source: CFPB, What is an interest-only loan? (the payment rises when the interest-only period ends)
  2. Loan amount $250,000.00, Interest rate 7%, Loan term (years) 30, Interest-only period (years) 5, Loan start date 2026-10-01 gives Interest-only payment $1,458.33, Payment after the interest-only period $1,766.95, First higher payment 2031-11-01.
  3. Loan amount $300,000.00, Interest rate 0%, Loan term (years) 30, Interest-only period (years) 10 gives Interest-only payment $0.00, Payment after the interest-only period $1,250.00, Total interest $0.00, Extra interest from interest-only $0.00.

How it works

Write L for the loan amount, r for the yearly rate ÷ 1200 (the monthly rate as a decimal), n for the months in the whole term (years × 12), and m for the interest-only months (interest-only years × 12). The interest-only years must be fewer than the term years; otherwise there is no answer.

  1. Interest-only payment, for payments 1 to m: L × r. The balance stays at L.
  2. Later payment, for payments m + 1 to n: P = L × r ÷ (1 − (1 + r)^−(n − m)), the level payment that repays L over the n − m months left. At 0%, P = L ÷ (n − m). The payment rise is P − L × r.
  3. Each month after the interest-only years: interest = balance × r; principal = P − interest, except that payment n pays whatever balance is left.
  4. Total interest is the sum over all n payments, which equals m × L × r + (n − m) × P − L. The total paid is L plus the total interest.
  5. Regular loan for comparison: the same L, rate, and n months with no interest-only years: payment L × r ÷ (1 − (1 + r)^−n), and its total interest is n × that payment − L. The extra interest from interest-only is the difference between the two totals.
  6. First higher payment (with a start date): payment m + 1, dated m + 1 months after the start date.

Assumptions

  • The rate is fixed for the whole term. Many interest-only loans have an adjustable rate; this page does not model rate changes.
  • In the interest-only years you pay only the interest, with no extra principal.
  • Interest is charged monthly at the yearly rate ÷ 12, the first payment is one month after the start date, and nothing is rounded between months.
  • Property tax, insurance, and fees are not included. The default rate is an example, not a current market rate.

Worked examples by hand

$400,000 at 6.5% over 30 years, interest-only for 10 years. r = 0.065 ÷ 12 = 0.00541667, n = 360, and m = 120. The interest-only payment is 400,000 × 0.00541667 = $2,166.67. For the last 240 months, (1 + r)^−240 = 0.273490, so P = 400,000 × 0.00541667 ÷ 0.726510 = $2,982.29, a rise of $815.63. Total interest = 120 × 2,166.67 + 240 × 2,982.29 − 400,000 = 260,000.00 + 315,750.21 = $575,750.21. A regular 30-year loan pays $2,528.27 a month and $510,177.95 of interest, so interest-only costs $65,572.26 more.

$250,000 at 7% over 30 years, interest-only for 5 years, starting October 1, 2026. The interest-only payment is 250,000 × 0.07 ÷ 12 = $1,458.33. Then (1 + r)^−300 = 0.174660 with r = 0.0058333, so P = 250,000 × 0.0058333 ÷ 0.825340 = $1,766.95. The first higher payment is payment 61, dated November 2031.

$300,000 at 0% over 30 years, interest-only for 10 years. Interest is 0, so the interest-only payment is $0, and the later payment is 300,000 ÷ 240 = $1,250. Total interest and extra interest are $0.

Other questions people ask

How is an interest-only payment calculated?

It is the loan balance times the yearly rate ÷ 12. On $400,000 at 6.5%, that is 400,000 × 0.065 ÷ 12 = $2,166.67 a month. None of it lowers the balance, so you still owe $400,000 when the interest-only years end.

What happens when the interest-only period ends?

The whole loan must then be repaid over the years left, so the payment rises even if the rate stays the same. On $400,000 at 6.5% over 30 years with 10 interest-only years, the payment goes from $2,166.67 to $2,982.29 for the last 20 years. The Consumer Financial Protection Bureau warns that the rise can be large.

Does an interest-only mortgage cost more?

Usually yes, because the balance stays high for longer and interest is charged on it. In the example above you pay $575,750 of interest, $65,572 more than on a regular 30-year loan at the same rate.

Who uses an interest-only mortgage?

Borrowers who expect their income to rise, who plan to sell or refinance before the payment goes up, or who want a low payment for a few years. Do not count on being able to sell or refinance: home values and your finances can change.

Can I pay extra principal during the interest-only years?

Most interest-only loans allow it, and it lowers both the interest and the later payment. This page assumes you pay only the interest in those years. Check your loan for a prepayment penalty.

Are interest-only loans qualified mortgages?

No. Under the federal ability-to-repay rule, a qualified mortgage cannot have interest-only payments, so these loans are non-qualified mortgages with their own lender rules.