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Interest-only payment

What is the payment while only interest is being charged?

Your numbers

$
%

Interest-only payment

$1,800.00

Annual interest$21,600

Tip. Plan for the reset. Payments jump when amortization begins on a shorter remaining term.

Assumptions

  • Monthly interest-only payment = principal × annual rate ÷ 12.
  • Principal does not reduce during interest-only period.

Explore the numbers

Examples and charts

Start with a scenario, then read the response curve to see which input actually moves the answer.

Example 1

HELOC draw period

A drawn home equity line during its interest-only phase.

Interest-only payment

$531.25

Example 2

Interest-only mortgage

A large balance where the payment gap against amortizing looks tempting.

Interest-only payment

$1,800.00

Example 3

Short-term bridge

A smaller bridging balance at a higher rate.

Interest-only payment

$1,050.00

Sweeps annual rate from half to one and a half times your value, holding everything else fixed.

Response curve

How annual rate moves the result

Interest-only payment

$1,800.00

$1.0k$1.5k$2.0k$2.5k4.0%6.0%8.0%10%
Chart axis: Annual rateNow 6.8% → $1.8k

What this calculates

Calculates the payment when you are covering interest alone. The principal does not shrink at all during this phase, so nothing you pay builds equity.

How to use it

  1. Start with balance and work down the form, or load an example to begin from a realistic case.
  2. Read the headline result alongside the supporting rows, which show the intermediate figures behind it.
  3. Check the assumptions. They decide what the number includes and, more importantly, what it leaves out.
  4. Sweep annual rate on the response curve to see how much it actually moves the answer.
  5. Run a cautious case as well as an optimistic one before using the estimate in a decision.

Common mistakes

  • Treating the interest-only payment as the long-term one.
  • Assuming you can refinance out of it, which depends on rates and your finances at that future date.
  • Forgetting that a HELOC rate is usually variable, so the payment moves with it.

Formula

Monthly interest-only payment = principal × annual rate ÷ 12

Inputs

  • Balance
  • Annual rate (%)

FAQ

Is interest-only cheaper overall?

The monthly cash need is lower now, but you build no equity and the total interest is usually higher because the balance never falls.

What happens when the interest-only period ends?

The full balance has to amortize over the remaining term, which is shorter than the original one. On a 30-year loan with 10 interest-only years, the payment then has to clear the whole balance in 20, so it rises sharply.

When does interest-only actually make sense?

Usually only with a specific, dated exit: a property sale, a bonus, or a refinance you are confident about. Relying on rising asset prices to bail you out is the version that goes wrong.

Are these numbers financial advice?

No. They are educational estimates based on the inputs and assumptions on this page. Confirm important decisions with a qualified professional and your own documents.

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