Interest-Only Loan Payment Calculator
Calculate your monthly payment during the interest-only period. See the difference between IO payments and fully amortizing payments side by side.
✓ Simple IO payment formula
✓ Compare IO vs. amortizing
✓ See total interest cost
Interest-only note calculator
Calculate IO payments and balloon balance at maturity.
How Interest-Only Payments Work
During the interest-only period (typically 5–10 years), you pay only the interest on the loan—no principal reduction. This results in significantly lower monthly payments but means you still owe the full loan amount when the IO period ends.
The Interest-Only Payment Formula
Monthly IO Payment = (Loan Balance × Annual Rate) ÷ 12
IO vs. Amortizing: Payment Comparison
| Loan Amount | Rate | IO Payment | 30yr Amortizing | Savings |
|---|---|---|---|---|
| $200,000 | 7% | $1,167 | $1,331 | $164/mo |
| $400,000 | 7% | $2,333 | $2,661 | $328/mo |
| $600,000 | 7% | $3,500 | $3,992 | $492/mo |
When IO Loans Make Sense
Interest-only loans are popular with real estate investors, borrowers expecting income growth, and buyers in high-cost markets who need lower initial payments. However, they carry risk—when the IO period ends, payments jump significantly.