Interest Only Mortgage
Estimate interest-only mortgage monthly payments, total interest cost, and principal due at end. Free calculator for IN, US, UK with charts and breakdowns.
About This Calculator
Our Interest Only Mortgage Calculator helps you determine the monthly interest-only payment, total interest paid, and total cost for any interest-only mortgage or loan. Whether you are considering an interest-only home loan in India, a US ARM with an interest-only period, or a UK interest-only mortgage, this tool provides instant, accurate results.
An interest-only mortgage differs from a standard amortizing loan because you pay only the interest each month, leaving the principal balance unchanged. The monthly payment is calculated by multiplying the loan amount by the annual interest rate and dividing by 12. Over the interest-only period, your debt does not decrease -- you must repay the full principal when the period ends.
Regional Notes
India: Interest-only home loans are offered primarily during the construction phase. Standard home loans use a reducing-balance EMI method. Typical rates range from 8.5% to 10% depending on credit profile and lender.
US: Interest-only mortgages are often structured as 5/1, 7/1, or 10/1 ARMs with an initial interest-only period. Rates are typically 0.5-1% higher than standard 30-year fixed mortgages. After the interest-only period, the loan recasts to a fully amortizing schedule.
UK: Interest-only mortgages remain popular, though lenders now require a clear repayment strategy (e.g., investment ISA, pension, or property sale). Typical rates are 4-6% depending on LTV ratio and borrower profile.
Frequently Asked Questions
What is an interest-only mortgage?
An interest-only mortgage is a loan where you pay only the interest each month for a specified period, without reducing the principal balance. After the interest-only period ends, you must repay the full principal either as a lump sum or through higher monthly payments.
How do you calculate an interest-only mortgage payment?
The monthly interest-only payment is calculated by multiplying the loan amount by the annual interest rate divided by 100, then dividing by 12. Total interest is the monthly payment multiplied by the number of months in the interest-only period.
What happens after the interest-only period ends?
After the interest-only period, you must repay the full principal balance. This can be done as a lump sum payment, by refinancing into a new mortgage, or by converting to a standard amortizing loan with higher monthly payments covering both principal and interest.
Are interest-only mortgages available in India?
Yes, some Indian banks offer interest-only mortgages, typically as construction-linked loans or teaser loans where only interest is paid during the construction phase. However, most home loans in India are standard amortizing loans where both principal and interest are paid from the start.
Are interest-only mortgages available in the US?
Yes, interest-only mortgages are available in the US, often structured as 5/1, 7/1, or 10/1 ARMs where the initial period is interest-only. Borrowers must qualify based on the fully amortizing payment, and these loans carry higher rates than standard mortgages.
Are interest-only mortgages available in the UK?
Yes, interest-only mortgages are common in the UK. Borrowers must demonstrate a credible repayment strategy, such as an investment ISA, pension lump sum, or sale of the property. Since 2014, lenders have tightened affordability checks for interest-only mortgages.
What are the advantages of an interest-only mortgage?
Lower monthly payments during the interest-only period, improved cash flow for investing elsewhere, and easier budget management. They can be useful for investors who expect property values to rise or borrowers who anticipate higher future income.
What are the risks of an interest-only mortgage?
The principal balance never decreases during the interest-only period, you may face a large lump sum payment at the end, and if property values fall you could owe more than the property is worth. Future refinancing may be difficult if your financial situation changes.