Interest-Only Mortgage Calculator

Calculate interest-only payments and see what happens when the loan converts to full amortization.

Loan Details

₹5L₹5Cr
5%20%
1 yr30 yrs

Monthly EMI

₹43,391

Principal

₹50,00,000

Total Interest

₹54,13,879

Total Payment

₹1,04,13,879

Interest Ratio

52%

Payment Breakdown

PrincipalInterest

Interest-Only Mortgage Calculator Formula & How It Works

IO Payment = Loan Balance × (Annual Rate ÷ 12) | After IO Period: M = P[r(1+r)ⁿ]/[(1+r)ⁿ−1]
  • IO Period: typically 3–10 years, no principal repayment
  • After IO: same loan balance amortizes over remaining term
  • Payment shock: amortizing payment is significantly higher
  • Total interest over loan > standard amortizing mortgage

During the interest-only period, you pay only the interest charge each month — the principal does not decrease. When the IO period ends, the full balance amortizes over the remaining term, causing a payment jump. IO loans make sense for investors with short hold periods or borrowers expecting income growth.

Interest-Only Mortgage Calculator FAQs

What happens when an interest-only mortgage ends?

The loan converts to a fully amortizing mortgage. The same outstanding balance (since no principal was repaid) now amortizes over the remaining, shorter term — causing a significant payment increase called 'payment shock'.

Who should use an interest-only mortgage?

Suitable for: real estate investors with short hold periods, borrowers expecting large income increases, and buyers in rapidly appreciating markets who prioritise low initial payments. Not ideal for long-term owner-occupants.

Are interest-only mortgages risky?

Yes. Risks include: no equity build-up during IO period, payment shock at conversion, and negative equity risk if home values fall. Lenders have tightened IO loan standards significantly since the 2008 financial crisis.

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