SiareTalk to us

Free calculator

Interest-only vs principal & interest calculator.

Interest-only repayments are lower because you are not paying anything off the loan. For a set period you pay just the interest. When it ends, the loan switches to principal & interest on the same balance over fewer years, so the repayment jumps. Enter your loan, rate, term and interest-only period to see both paths side by side.

Loan amount

Next step

Ready to take the next step.

An estimate only goes so far. Purchase, refinance or construction — tell us what you need, and start an application or talk to us first.

Start an applicationTalk to us

How this calculator works.

  1. The principal & interest (P&I) repayment is the standard repayment that pays the loan to zero over the full term.
  2. The interest-only repayment is the loan times the interest rate, divided by 12. If your lender charges more for interest-only, the extra-rate answer adds it for the interest-only period.
  3. When the interest-only period ends, the loan reverts to P&I on the full balance over the years that remain, at the P&I rate. The difference from the interest-only repayment is the jump.
  4. Extra interest is the total interest on the interest-only path less the total on the P&I path. It is higher because the balance stays higher for longer.
  5. The calculator also shows what you would still owe when the interest-only period ends, on each path.

What it assumes

  • The starting scenario is a loan of $500,000 at 6.44% (the RBA average new variable rate for Jul 2026, adjusted for the 30 Sep rise) over 30 years with 5 years interest-only.
  • The extra rate for interest-only starts at 0%. Set it to the difference your lender charges.
  • The rate is held constant throughout.
  • Assumptions last reviewed 25 September 2026.

Questions people ask.

Why are interest-only repayments lower?

Because they cover only the interest for the period. A principal & interest repayment also pays off part of the loan every month, so it is bigger. The trade-off is that with interest-only the balance does not fall.

What happens when the interest-only period ends?

The loan reverts to principal & interest over the years that are left, on the full original balance. Because the same amount is repaid over fewer years, the repayment is higher than it would have been. With the starting numbers it jumps by about $674 a month, from $2,683 to $3,357.

Do I pay more interest overall with an interest-only loan?

Yes, when the rate is the same, because you owe more for longer. With the starting numbers the extra interest is about $37,565 over the life of the loan.

Who uses interest-only loans?

Investors often choose them because interest is the deductible cost of an investment loan, and some borrowers use them for a short period, for example during a renovation or a change in income. They suit some situations and not others, and a broker can help you decide.

How long can a loan be interest-only?

Lenders set their own limits. Five years is common, and some allow longer for investment loans. The calculator lets you test up to ten years.

Is the interest rate higher on an interest-only loan?

Often it is, because lenders price the extra risk. Use the extra-rate answer to add whatever difference your lender charges. It applies during the interest-only period only.

More calculators.

Interest-Only vs Principal & Interest Calculator | Siare