Interest-only mortgage payment worksheet This page compares the lower opening payment with the later fully amortizing recast payment. It also makes the key tradeoff visible: the balance usually stays unchanged during the interest-only period, so the payment shock and total interest can be much higher than on a standard repayment mortgage.
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Scope note
This worksheet assumes a fixed note rate and a standard recast into full amortization after the interest-only period. It does not model adjustable-rate caps, balloon payoffs, escrow items, fees, or lender-specific qualification rules.
Result
$2,166.67/mo
The opening required interest-only payment lasts for 10 years, then recasts to $2,982.29/mo for the remaining 20 years.
First-month IO outlay
$2,166.67
Recast payment
$2,982.29
Payment shock
$815.63
Payment shock %
37.64%
Balance at recast
$400,000.00
Recast share of income
29.82%
Balance reduced during IO
$0.00
Total interest
$575,750.21
Extra interest vs standard amortization
$65,572.26
Recast payment is in a stretch range The recast payment is 29.82% of the gross monthly income entered here, compared with 21.67% for the first-month interest-only outlay. The payment change versus that opening outlay is $815.63 (37.64%).
Worksheet
Compare the lower opening payment with the full-life cost of the note.
Interest-only payment
$2,166.67
First-month IO outlay with voluntary principal
$2,166.67
Recast payment after IO period
$2,982.29
Payment shock
$815.63
Balance still owed at recast
$400,000.00
Principal reduced during IO period
$0.00
Total interest over full loan life
$575,750.21
Extra interest vs fully amortizing from day one
$65,572.26
Comparison
A fully amortizing version of the same loan would start at $2,528.27/mo and generate $510,177.95 of total interest over the full term.
During the interest-only period you pay $260,000.00. None of that payment reduces principal under the required-payment-only assumption.
After the recast, the remaining $400,000.00 must amortize over only 20 years, which is what drives the payment jump.
The later amortizing phase contributes $315,750.21 of interest on top of the $260,000.00 paid during the interest-only years.
Checkpoint schedule
These checkpoints show how the balance usually stays flat during the interest-only period and only starts to fall after the recast.
Interest-only mortgage calculator guide: compare the opening payment, recast payment
An interest-only mortgage calculator is only useful if it shows more than the lower opening payment. This page compares the interest-only payment with the later fully amortizing payment, shows the payment shock when the note recasts, and makes the unchanged balance and extra long-run interest visible enough to support a real borrowing decision.
What this interest-only mortgage calculator is actually showing
This page models a fixed-rate mortgage that allows interest-only payments for an introductory period and then recasts into fully amortizing payments for the remaining term. During the interest-only years, the scheduled monthly payment covers interest only, so the principal balance does not fall under the standard no-prepayment assumption used here.
That distinction is the whole point of the page. A thin interest-only mortgage widget that reports only the opening payment can make the loan look much cheaper than it really is. In practice, most borrowers want to know four separate things: how low the opening payment is, how high the later recast payment becomes, how much balance is still owed at the end of the interest-only period, and how much extra total interest the structure creates versus a standard repayment loan.
This calculator is therefore best used as a comparison worksheet. It does not underwrite the loan or decide whether an interest-only structure is suitable. It shows the payment path and the cost tradeoff in a way that helps you pressure-test affordability before relying on lender marketing or the attractive opening payment alone.
How the interest-only period and recast payment work
The opening payment on an interest-only mortgage is straightforward when the note rate is fixed: monthly interest equals the outstanding balance multiplied by the monthly interest rate. Because no scheduled principal is being repaid during that phase, the balance at recast is usually the same as the original loan amount if the borrower has only made the required payments.
Once the interest-only period ends, that unchanged balance has to be repaid over a shorter remaining term. A 30-year mortgage with a 10-year interest-only period does not become a new 30-year repayment loan after year 10. It becomes a 20-year amortizing loan on the full remaining balance, which is why the later scheduled payment is usually much higher than the opening payment.
That is also why the CFPB's mortgage rules and Loan Estimate disclosures focus on the post-recast fully amortizing payment rather than only the temporary interest-only amount. If the opening years feel affordable but the recast payment does not, the structure can create repayment stress even if the note never changes rate.
For a fixed-rate note, the scheduled payment during the interest-only years covers monthly interest only.
Recast payment = Fully amortizing payment on the remaining balance over the remaining term
After the interest-only period ends, the still-outstanding balance must amortize over fewer years than the original term.
Extra interest cost = Total interest on the interest-only structure − Total interest on a fully amortizing version of the same loan
Compares the full-life cost of the interest-only path against starting principal repayment from day one.
Worked example: why the payment shock matters
Suppose the loan amount is 400,000, the fixed note rate is 6%, the interest-only period lasts 10 years, and the full term is 30 years. The opening interest-only payment is 2,000 per month because the balance is 400,000 and the monthly rate is 0.5%. That looks materially cheaper than a standard fully amortizing 30-year mortgage at the same rate.
The catch is what happens at recast. After 10 years of scheduled interest-only payments, the balance is still 400,000 under the no-prepayment assumption. That full balance now has to amortize over the remaining 20 years, so the scheduled payment jumps sharply. In other words, the lower opening payment was not created by making the debt cheaper. It was created by postponing principal repayment.
That is why this page also compares total interest and the payment shock against a fully amortizing version of the same note. Borrowers often search for an interest-only mortgage calculator because they are trying to answer an affordability question, but the real question is broader: can the household tolerate the future required payment and the higher total borrowing cost if refinancing or sale is not available on favourable terms later?
Testing voluntary principal during the interest-only period
Some borrowers use an interest-only loan because they want required-payment flexibility, not because they intend to avoid principal forever. The extra-principal field lets you test that more realistic strategy. Enter a voluntary monthly principal amount and the calculator reduces the balance during the interest-only period, then recalculates the recast payment, total interest, and checkpoint schedule from the lower balance.
This is different from pretending the loan is fully amortizing from day one. The required interest-only payment still shows the contractual opening payment, while the first-month outlay shows the voluntary cash flow if you add principal. The comparison helps separate three questions that competitors often blend together: what the lender requires during the interest-only phase, what you plan to pay voluntarily, and what the later required payment could become if the balance has or has not fallen.
The voluntary-principal result is still a planning estimate. Actual servicer rules, payment application order, recast terms, and interest accrual conventions can differ. Use it to pressure-test the direction and scale of the tradeoff, then compare it with the lender's official amortization, projected-payment disclosures, and prepayment rules.
Stress-testing the recast payment against income
The gross monthly income field adds a quick payment-shock stress test. It compares the first-month interest-only outlay and the later recast payment with the income entered on the page. This does not underwrite the loan, but it answers the practical question behind searches such as interest-only mortgage payment calculator, interest-only loan calculator, and mortgage recast calculator: will the future required payment still fit the household's budget?
A recast payment that looks manageable in isolation can become a stretch once taxes, insurance, maintenance, other debts, and savings goals are added. The page therefore treats the income comparison as a warning layer rather than a lending decision. If the recast payment is already a high share of gross income before escrow and other obligations, the loan deserves a deeper affordability review before the lower opening payment is allowed to drive the decision.
This is also useful when comparing interest-only mortgage options with a standard mortgage calculator. A standard repayment loan may have a higher opening payment, but it starts reducing principal immediately and may avoid a sharper payment jump later. The right comparison is not only month one versus month one; it is the payment path, balance path, and total-interest path over the full life of the note.
What this worksheet does not include
This page uses a simplified fixed-rate interest-only structure. It does not model adjustable-rate caps, margin-and-index resets, escrow, mortgage insurance, balloon payments, fees, tax treatment, or lender-specific underwriting rules. If the actual loan is an ARM, a balloon note, or a loan with a repayment vehicle requirement, the real payment path can differ materially from this worksheet.
It also assumes required payments are made as scheduled and that no extra principal is paid during the interest-only period. In practice, voluntary principal reduction can change the later payment shock, and lender-specific recast or modification rules may differ from the simple path shown here.
Use the calculator as a mortgage-planning tool, not as a binding lender quote. Before committing to an interest-only mortgage, compare the Loan Estimate and any official projected-payment disclosures with the household's realistic long-run repayment capacity.
Is an interest-only mortgage cheaper than a standard repayment mortgage?
Usually only at the start. The required payment is lower during the interest-only period because you are not repaying principal on schedule, not because the debt itself is cheaper. Over the full life of the loan, total interest is often higher than on a fully amortizing mortgage with the same amount, rate, and original term.
Why does the payment jump so much after the interest-only period ends?
Because the balance often has not fallen during the interest-only years, yet it still has to be repaid over a shorter remaining term. A loan that started as a 30-year note with a 10-year interest-only phase typically becomes a 20-year amortizing payment on the full remaining balance at recast, which creates the payment shock.
Does this calculator assume the balance stays the same during the interest-only years?
Yes, under the standard no-prepayment assumption. If you make only the required interest-only payments, principal is not reduced during that phase, so the balance at recast is usually the original loan amount. Extra voluntary principal payments would change the later repayment path.
Can this page replace a lender's Loan Estimate or mortgage quote?
No. It is a planning worksheet, not a lender disclosure or underwriting decision. Actual projected payments can differ because of adjustable-rate mechanics, escrow, mortgage insurance, fees, balloon features, or lender-specific terms that are outside this simplified model.
Should I enter extra principal during the interest-only period?
Enter extra principal if you plan to make voluntary principal payments during the interest-only years and want to see how that could reduce the balance at recast. Leave it at 0 if you want the required-payment-only version where the balance stays unchanged until the interest-only period ends.
How does the income stress test work?
The calculator compares the first-month interest-only outlay and the later recast payment with the gross monthly income you enter. It is a planning guardrail, not lender underwriting, because it does not include escrow, maintenance, other debts, credit standards, or local qualification rules.
Is the interest-only payment the same as the amount I should budget?
Not always. The required interest-only payment may be the minimum due, but a realistic budget may include voluntary principal, escrow, insurance, taxes, maintenance, and reserves for the future recast payment. The opening payment should be read next to the recast payment and total-interest comparison.
