Interest-Only Home Loan Calculator With a Built-in Money Saving Idea

Interest-Only Home Loan Calculator Sign

This calculator will calculate the before and after payments and the total cost of an interest-only home mortgage.

Plus, the calculator on this page will also calculate the investment earnings lost by not choosing a principal and interest (PI) payment loan.

Note: If you only want to calculate a house payment that includes, principal, interest, taxes, insurance, and PMI, please visit the PITI Mortgage Calculator.

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Interest-Only Home Loan Calculator

Calculate before and after payments and the total cost, of an interest-only home mortgage.

Special Instructions

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Selected Data Record:

A Data Record is a set of calculator entries that are stored in your web browser's Local Storage. If a Data Record is currently selected in the "Data" tab, this line will list the name you gave to that data record. If no data record is selected, or you have no entries stored for this calculator, the line will display "None".

DataData recordData recordSelected data record: None
Mtg amount:Home loan amt:Home loan amount:Home loan amount:

Home loan amount:

Enter the dollar amount of the home loan (principal amount), but without the dollar sign and any commas.

Rate:Interest rate:Annual interest rate:Annual interest rate:

Annual interest rate:

Enter the annual percentage rate (APR) of the home loan. Enter as a percentage without the percent sign (for 6%, enter 6).

# of years:Number of years:Loan term in years:Term of the home loan in years:

Term of the home loan in years:

Enter the term of the home loan in number of years.

IO term yrs:IO term years:Interest-only term in years:Interest-only term in years:

Interest-only term in years:

Enter the number of years you will be making the interest-only payments.

Invest rate:Investment rate:Expected return on investments:Expected return on investments:

Expected return on investments:

Enter the annual percentage return you expect to earn on your future investments. Enter as a percentage without the percent sign (for 6%, enter 6).

Interest-Only Home Loan
IO pmt:Monthly IO pmt:Monthly IO mortgage payment:Monthly IO mortgage payment:

Monthly IO mortgage payment:

Based on your entries, this how much your monthly interest-only payment will be. This does not include property tax or insurance payments.

Non-IO pmt:Pmt after IO yrs:Monthly payment after IO period:Monthly payment after IO period:

Monthly payment after IO period:

Based on your entries, this is what your monthly payment will increase to once the interest-only payment period has expired.

IO cost:IO interest cost:Total IO interest cost:Total IO home loan interest cost:

Total IO home loan interest cost:

Based on your entries, this how much interest you will pay on the interest-only home loan after making all payments for the term entered.

Alternative to IO Home LoanAlternative to Interest-Only Home LoanAlternative to Interest-Only Home LoanAlternative to Interest-Only Home Loan
Alt loan amt:Alternate loan amt:More affordable loan amount:More affordable principal and interest loan amount:

More affordable principal and interest loan amount:

Based on the interest-only payment amount, this is the size of a principal and interest home loan you could take out for the same monthly payment. In other words, at this loan amount you would be making the same payment as the interest-only payment amount, but in this case you will be paying down on the principal balance instead of letting it sit there to earn interest for the mortgage company.

Alt loan cost:Alternate loan cost:More affordable loan interest cost:More affordable home loan interest cost:

More affordable home loan interest cost:

This is how much interest you would pay if you purchased a smaller home with the more affordable loan amount and made monthly principal and interest payments.

Int savings:Interest savings:Interest savings over IO home loan:Interest savings over IO home loan:

Interest savings over IO home loan:

This is how much interest you could save from buying a smaller home with a more affordable loan amount and making principal and interest payments versus a larger loan amount with interest-only payments.

Savings FV:Savings future value:Future value of invested savings:Future value of invested interest savings:

Future value of invested interest savings:

If you invested the difference between the post-interest-only payment and the interest-only payment, this could be the future value of your investment once the home loan is paid off.

If you would like to save the current entries to the secure online database, tap or click on the Data tab, select "New Data Record", give the data record a name, then tap or click the Save button. To save changes to previously saved entries, simply tap the Save button. Please select and "Clear" any data records you no longer need.

Help and Tools


What an interest-only loan is, and an alternative that will save you a boatload of money.

What is an Interest-Only Home Loan?

In case you're not familiar with it, an interest-only home loan (IO) is one that for the first several years of the loan term you only pay the finance charges as they come due. In other words, during this portion of the loan "repayment," the amount you owe to the lending institution stays the same as it was before you made your first payment.

Of course, after the IO payment term has expired, you will then need to convert the IO loan to a conventional PI mortgage, wherein you actually begin reducing the amount you owe to the mortgage company. And because you will be paying down the principal, the amount of your monthly mortgage payment will increase (is that something you want to look forward to?).

Looking at it another way, an IO home loan is a cleverly-devised home financing method that allows a real estate company to sell you more home than you can afford, while allowing the mortgage company to earn finance charges on higher loan balances that would not exist if home buyers only bought homes they could afford.

Ironically, the same mortgage company that accuses you of throwing money away by renting has no problem at all with you sending them pure finance charge payments that buys you absolutely nothing. I, for one wish they would call IO home loans what they really are, "Rent to Buy" offers.

How to Use Interest-Only Payments to Save a Fortune

Here is what I suggest to people who inquire about IO home loans.

First, calculate the IO loan payment using a calculator like the one on this page.

Next, determine the size of a conventional mortgage that would result in a PI payment equal to the IO payment (the interest-only home loan calculator will do that for you).

The result will be a house that will be more in line with what you can actually afford -- provided you have accurately forecasted the ongoing costs of owning the house (insurance, property taxes, utilities, maintenance, repairs, replacement costs, commute costs, etc.).

By reducing the size of the mortgage to allow you to make PI payments equal to the IO payment, at the end of the IO payment period, your mortgage payment will remain unchanged. This results in a monthly savings equal to the difference between the IO payment and the higher post-IO payment.

Furthermore, because you are buying a smaller, more affordable home, you will start saving money immediately in the form of reduced house ownership costs (insurance, property taxes, utilities, etc.).

So what can you do with all the money you'll be saving? You could ...

  • Use it to your mortgage to pay it off early.
  • Use it to pay off high APR debt.
  • Invest it to earn interest on finance charge savings.
  • Combine it with the equity you are building and trade-up to a bigger house without having to borrow more money.

The possibilities to save (earn) money using this idea are endless.

Adjust Calculator Width:

Move the slider to left and right to adjust the calculator width. Note that the Help and Tools panel will be hidden when the calculator is too wide to fit both on the screen. Moving the slider to the left will bring the instructions and tools panel back into view.

Also note that some calculators will reformat to accommodate the screen size as you make the calculator wider or narrower. If the calculator is narrow, columns of entry rows will be converted to a vertical entry form, whereas a wider calculator will display columns of entry rows, and the entry fields will be smaller in size ... since they will not need to be "thumb friendly".

Show/Hide Popup Keypads:

Select Show or Hide to show or hide the popup keypad icons located next to numeric entry fields. These are generally only needed for mobile devices that don't have decimal points in their numeric keypads. So if you are on a desktop, you may find the calculator to be more user-friendly and less cluttered without them.

Stick/Unstick Tools:

Select Stick or Unstick to stick or unstick the help and tools panel. Selecting "Stick" will keep the panel in view while scrolling the calculator vertically. If you find that annoying, select "Unstick" to keep the panel in a stationary position.

If the tools panel becomes "Unstuck" on its own, try clicking "Unstick" and then "Stick" to re-stick the panel.