Why does my repayment jump so much after the interest-only period?

Because none of your IO repayments reduced the principal, the full loan balance still has to be paid off — but now over a shorter remaining term. Spreading the same balance over fewer years means a higher regular repayment.

Is interest-only ever a good idea?

It can suit investment properties (where loan interest may be tax-deductible) or short periods of tight cash flow, but it costs more in total interest and delays building equity. It's worth planning for the step-up in repayments before the IO period ends.

Can I extend or renew an interest-only period?

Some lenders allow this subject to a new approval, but it's not guaranteed and typically requires demonstrating you can still service the loan. This calculator assumes a single IO period followed by standard P&I.

Interest-Only Repayment Calculator

Compare your interest-only repayment now to what you'll pay once the loan switches to principal & interest.

Loan amount

Interest rate

% p.a.

Interest-only period

years

Total loan term

years

Repayment frequency

Interest-only repayment$2,583

Repayment after IO period (P&I): $3,283
Extra interest vs P&I from day one: $37,429

This calculator provides estimates only. It is general information, not financial or taxation advice, and doesn't account for your full personal circumstances. Confirm figures with your lender or a licensed adviser before making a decision.

Put this calculator on your own website

Embed it as a lead magnet and capture visitor emails.

How this calculator works

During an interest-only (IO) period, your repayment only covers the interest charged — none of it reduces the loan balance. That makes the repayment lower for a while, but it also means the full principal is still outstanding when the IO period ends, so the principal & interest (P&I) repayment that follows is calculated over a shorter remaining term and comes in higher than if you'd been paying P&I the whole way through.

Enter your loan amount, rate, how long the interest-only period runs, and the total loan term. The calculator shows your interest-only repayment now, what your repayment jumps to once P&I kicks in, and how much extra interest the IO period costs you compared with paying P&I from day one.

Worked example: a $500,000 loan at 6.2% p.a. with a 5-year interest-only period on a 30-year term costs $2,583.33 a month during the IO period. Once P&I starts on the remaining 25-year term, the repayment jumps to $3,282.91 a month — noticeably higher than the $3,062.34 you'd pay if you'd been on P&I from the start — and the IO period adds about $37,400 in extra interest over the life of the loan.

Interest-only periods are common for investment loans (where the interest may be tax-deductible) or to manage short-term cash flow, but they cost more in total interest and come with a real "repayment shock" when P&I begins — plan for the higher repayment in advance.

Frequently asked questions

Why does my repayment jump so much after the interest-only period?: Because none of your IO repayments reduced the principal, the full loan balance still has to be paid off — but now over a shorter remaining term. Spreading the same balance over fewer years means a higher regular repayment.
Is interest-only ever a good idea?: It can suit investment properties (where loan interest may be tax-deductible) or short periods of tight cash flow, but it costs more in total interest and delays building equity. It's worth planning for the step-up in repayments before the IO period ends.
Can I extend or renew an interest-only period?: Some lenders allow this subject to a new approval, but it's not guaranteed and typically requires demonstrating you can still service the loan. This calculator assumes a single IO period followed by standard P&I.