Interest-only mortgages let you pay only interest for 5-10 years, then switch to principal + interest payments. Lower initial payments but higher long-term cost. Use this calculator to compare.
Quick answer
Interest-only mortgages reduce payments by 30-40% during the IO period but cost significantly more over the loan life. Best for high-income borrowers with irregular income or short-term ownership plans.
Interest-only mortgage calculator
Interest-only payment (years 1-10)
$2,167/mo
Full payment (years 11-30)
$3,012/mo
Example: 400k loan at 6.5%, 10-year IO period
Interest-only vs traditional mortgage
| Feature | Interest-only | Traditional |
|---|---|---|
| Initial payment | $2,167 | $2,661 |
| Later payment | $3,012 | $2,661 |
| Total interest paid | $584,280 | $557,960 |
| Equity after 10 years | $0 | $94,420 |
Pros and cons
Pros
- ✓ Lower initial payments
- ✓ More cash flow flexibility
- ✓ Can afford more expensive home
- ✓ Good for irregular income
Cons
- ✗ No equity buildup during IO period
- ✗ Payment shock when IO ends
- ✗ Higher total interest cost
- ✗ Riskier if home value drops
Compare all mortgage options
Get quotes for traditional and interest-only loans to see which fits your situation.
Get quotesWho should consider interest-only mortgages?
- High-income professionals: Doctors, lawyers with rising income trajectories
- Commission-based earners: Real estate agents, salespeople with variable income
- Short-term owners: Plan to sell within 5-7 years
- Investors: Rental properties where cash flow matters more than equity
Learn more: ARM vs Fixed Rate Guide
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