Total IO Cost
$130,000.00
Across 60 months
Finance
Interest Only Calculator
Estimate monthly IO payment, post-IO payment, and cost delta for mortgage, HELOC, loan, line of credit, and construction draws.
Results
Monthly Payment
Monthly IO Payment
$2,166.67
Before repayment begins.
Interest-only keeps the payment low for 60 months before amortization starts.
Payment After IO
$2,700.83
Repayment over 300 months
Fully Amortizing Payment
$2,528.27
Month 1 baseline
Delta vs Full Amortization
+$172.56
Monthly gap
Total Cost Delta
+$30,067.95
IO path minus baseline
Payment timeline
Monthly payment curve.
IO months are shaded when a repayment comparison is available. Tooltips show draw rows and balances.
Monthly IO payment follows the balance. Construction draws change the payment month by month.
Need a change for Interest Only Calculator?
About this calculator
Method, formulas, and limits.What this does
Calculates interest-only (IO) monthly payments, the fully amortizing payment that replaces them after the IO period ends, and the cost delta between an IO path and a standard amortizing loan. Supports mortgages, HELOCs, lines of credit, personal loans, and construction draws with multi-draw funding schedules for real-world flexibility.
Who it is for
Homebuyers considering an interest-only mortgage, homeowners with a HELOC, developers modeling construction draws, and anyone evaluating whether an IO period makes sense for their cash flow versus total interest cost over the life of the loan.
How it works
During the IO period, the calculator charges monthly interest on the outstanding balance without reducing principal. After IO ends (if a total term is set), it computes a standard amortizing payment over the remaining months. For HELOCs and lines of credit, it uses the drawn balance rather than the full credit limit. Construction mode adds each draw to the running balance before charging interest, producing a month-by-month payment timeline chart.
Limitations
Does not model rate adjustments, prepayment penalties, taxes, insurance, or loan-specific fine print. The IO period assumes the rate stays constant throughout, which may not reflect adjustable-rate products. Construction draws assume perfect funding on schedule with no delays or cost overruns.
Key calculations
- Interest-only payment
- Monthly IO payment = loan balance × (annual rate / 100) / 12. No principal is paid during the IO period, so the loan balance stays constant throughout.
- Amortizing payment
- Standard payment = principal × (monthly rate × (1 + monthly rate)^months) / ((1 + monthly rate)^months − 1). This is the standard loan amortization formula used after the IO period ends.
- Post-IO payment
- After the IO period ends, the remaining term is amortized: remaining months = total term − IO months. The payment recalculates using the same principal over fewer remaining months, which means a higher payment than the IO payment.
- Cost delta
- Total IO path interest − total fully amortizing interest. A positive delta means IO costs more over the full term because principal was deferred; a negative delta (with early payoff) means IO saved money.
Reference ranges
- IO period length
- Common IO periods range from 3 to 10 years (36–120 months). Most mortgages offer 5–10 year IO terms; HELOCs often have a 10-year draw period followed by a repayment period.
- Interest rate premium
- IO loans typically carry a 0.25–0.75% higher rate than standard amortizing loans because the lender takes on more risk with deferred principal repayment. This premium varies by lender, loan type, and borrower profile.
- Payment reduction
- An IO payment is typically 20–40% lower than a fully amortizing payment for the same loan amount and rate, since no principal is being repaid each month. This frees up cash flow during the IO period.
- Total interest impact
- Over a full 30-year term, an IO path can cost 15–30% more total interest than amortizing from the start. However, IO can be cheaper if the loan is paid off early, the property is sold before the IO period ends, or the freed cash flow generates a higher return elsewhere.
How to use it
- 1.Choose the loan typeSelect mortgage, HELOC, line of credit, personal loan, or construction. Each type adjusts the input fields and how the calculator models the outstanding balance.
- 2.Enter the loan amount and rateFill in the loan amount or drawn balance, annual interest rate, and number of interest-only months. For HELOCs and lines of credit, the credit limit is entered separately from the drawn balance.
- 3.Set the total termEnter a total term in months to see the post-IO payment and a cost comparison versus a fully amortizing loan. Without a total term, only the IO payment is shown without a repayment comparison.
- 4.Add construction drawsFor construction loans, add 2 to 5 draw rows with the month index and amount of each draw. The calculator adds each new draw to the running balance before computing that month's interest, mirroring how construction funding actually works.
- 5.Review the resultsCompare the IO payment, post-IO payment, total interest under each path, and the cost delta. The timeline chart shows how the balance and payments evolve month by month so you can see exactly when the payments change.
- 6.Save and compare scenariosUse the save button to keep a scenario for side-by-side comparison. This lets you test different loan amounts, rates, IO periods, or loan types in one view to identify the most cost-effective structure.
An interest-only loan keeps the monthly payment lower during the IO period because you only pay interest on the outstanding balance without reducing principal. This improves short-term cash flow but means the balance stays the same until the IO period ends, at which point the payment increases to amortize the remaining term.
The calculator switches to a standard amortizing payment based on the remaining original term. Because the principal has not been reduced during the IO period, the post-IO payment is typically higher than both the IO payment and what a fully amortizing payment would have been from the start. The results show this jump clearly so you can plan for it.
A HELOC or line of credit usually tracks the drawn balance rather than the full credit limit. The calculator lets you enter the credit limit separately from the drawn amount so you can model scenarios where you borrow less than your maximum. This distinction matters because you only pay interest on what you actually draw.
Enter 2 to 5 draw rows, each with a month index and a dollar amount. The calculator adds each new draw to the running balance before charging monthly interest for that period. This means the payment starts low and increases as draws are funded, mirroring how real construction loans disburse money at project milestones rather than all at once.
The result cards show the starting IO payment, the payment after IO ends, and the cost delta versus a fully amortizing path when a total term is present. The delta compares total interest paid under each scenario so you can weigh the cash flow benefit of the IO period against the higher total cost over the full loan term.
An IO loan can make sense when you expect higher income in the future, plan to sell or refinance before the IO period ends, or want to maximize cash flow for other investments. However, it costs more in total interest over a full term and carries the risk of payment shock when the IO period ends. The calculator helps you compare these tradeoffs quantitatively.
Use the rate you expect to pay during the IO period. For fixed-rate IO loans, this is straightforward. For adjustable-rate products, use your best estimate of the average rate over the IO term. The calculator assumes a constant rate throughout, so testing multiple rate scenarios is a good way to understand sensitivity.
Related calculators
Quick jumps
Mortgage Payoff Calculator
Compare a standard amortizing schedule against the IO path.
Reverse Mortgage Calculator
Review another home-finance planning route.
CD Rate Calculator
Check a savings-term calculator with a clear horizon.
401k Calculator
Project 401k growth with employer match, then simulate retirement withdrawals over time.