Interest-Only vs Principal & Interest Calculator
See what an interest-only period really costs, and how far repayments jump the day it ends. The trap is not the lower payment - it is that the loan still has to be repaid over a shorter remaining term, so the step up at expiry is much larger than most borrowers expect.
Your details
Interest-only is usually priced above P&I.
| Loan amount | $700,000 |
| P&I rate | 6.10% |
| Interest-only rate | 6.40% |
| Interest-only repayment | $3,733 |
| P&I repayment if you started now | $4,242 |
| P&I repayment after 5 years Amortised over the remaining 25 years | $4,553 |
| Payment shock at expiry | $820 a month (22%) |
| Balance when interest-only ends Unchanged - no principal repaid | $700,000 |
| Total interest, interest-only path | $889,899 |
| Total interest, P&I from the start | $827,107 |
| Extra interest cost | $62,792 |
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Frequently asked questions
Why do repayments jump so much at expiry?
Two things happen at once. You start repaying principal, and you have to do it over the remaining term rather than the original one. A 30-year loan with 5 years interest-only has to amortise over 25 years, so the repayment is higher than if you had taken P&I from day one.
When does interest-only make sense?
Most commonly on an investment property, where the interest is deductible and the strategy is to direct spare cash at non-deductible debt on your own home instead. It can also bridge a genuine short-term income dip. It rarely makes sense purely to afford a bigger loan - lenders assess you on the post-expiry repayment anyway.
General advice warning: This calculator provides general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice.
Results are estimates based on the inputs and assumptions shown. Any interest rate used is an example and is not an offer of credit. Speak to a licensed credit representative before acting on these figures.