Interest Only Home Loan Calculator
Interest-only loans, made simple
An interest-only (I/O) home loan can reduce repayments for a period of time because you’re only paying the interest charged, not paying down the loan balance.
This can be useful for cash flow management (often for investors), but there’s a catch: when the I/O period ends, the loan typically reverts to principal and interest (P&I). That means repayments usually jump because the remaining balance must be repaid over the remaining term.
This calculator helps you compare both stages side-by-side, so you can see:
- Your estimated repayment during the I/O period
- Your estimated repayment during the P&I period
- Total interest over the full term (estimate)
- Total repaid over the full term (principal + interest)
When an interest-only period can make sense
Interest-only can be useful when:
- You want lower repayments for a set period to support cash flow
- You’re focusing on building or holding liquidity (buffer) during the early years
- You’re investing and prefer to direct funds elsewhere (rather than paying principal)
What to keep in mind
Interest-only isn’t “cheaper”; it usually increases total interest over time because the balance stays higher for longer.
Also, once the loan reverts to P&I, repayments often increase sharply, especially if:
- The I/O term is long
- The P&I remaining loan term is shorter
If you’re considering I/O, it’s worth checking your “after I/O” repayment is still comfortable at a higher rate, not just today’s rate.
How to use this calculator
- Enter your total loan amount and loan term
- Choose your total I/O term (years)
- Enter the I/O rate and the P&I rate (after it reverts)
- Review the two repayments and the totals
Interest Only (I/O) Calculator Summary
Inputs
Repayment timeline
I/O repayment (I/O)
$0.00
Years 1 to 1, I/O
P&I repayment (P&I)
$0.00
Years 2 to 30, P&I
Total interest
$0
Across the full loan term
Total repaid
$0
Across the full loan term
This calculator provides estimates only and assumes rates remain constant during each period. Lender calculations can differ due to daily interest methods, fees, and product rules. If you’re using I/O for an investment strategy, it’s worth checking how the post-IO repayment looks at a higher rate.
See if 'Interest Only' is right for you
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FAQs – Interest Only (I/O) Home Loans
Why would someone choose an interest-only loan?
An interest-only loan can reduce repayments for a set period because you’re only paying the interest charged, not the principal. This can improve cash flow in the short term and is commonly used by property investors who want flexibility while holding or growing a portfolio.
Why are interest-only loans common for investment properties?
For investment loans, the interest portion of repayments is generally tax-deductible, while principal repayments are not. Using interest-only can help investors direct surplus cash toward other priorities, such as reducing non-deductible home loan debt, building buffers, or funding additional investments.
(This is general information only and not tax advice.)
Does an interest-only loan reduce the total cost of the loan?
Usually no. Because the loan balance does not reduce during the interest-only period, total interest paid over the full term is often higher compared to paying principal and interest from the start. That’s why it’s important to understand both the short-term cash flow benefit and the long-term cost.
What happens when the interest-only period ends?
When the interest-only period finishes, the loan typically reverts to principal and interest. Repayments usually increase because the remaining balance must be repaid over a shorter time. This calculator shows both repayments so you can plan for that change in advance.
Is an interest-only loan right for everyone?
Not necessarily. Interest-only can suit some investors and certain strategies, but it’s not ideal for everyone. If your priority is paying down debt quickly or you’re relying on stable repayments long term, a principal and interest loan may be more appropriate. The right structure depends on your goals, cash flow, and risk tolerance.