Interest-only vs principal and interest calculator
An interest-only loan charges only interest for a set period, so repayments stay low and the balance doesn't fall; principal and interest repays the balance from the first payment. Compare monthly repayments, total interest paid, the repayment shock when the IO period ends, and the year P&I becomes the cheaper option.
Last updated
Rates, insurance and property management, not including your loan repayments.
1–30
P&I monthly
$2,494
IO monthly
$2,080
Monthly repayment after IO ends
$2,680
P&I cheaper from
Yr 17
P&I total interest
$481,887
IO total interest
$512,888
Annual saving during IO
$4,970
Only while the loan stays interest-only. Repayments rise once the IO period ends.
| Year | P&I repayment | IO repayment | P&I balance | IO balance | P&I cashflow | IO cashflow |
|---|---|---|---|---|---|---|
| 1 | $29,930 | $24,960 | $410,891 | $416,000 | -$7,250 | -$2,280 |
| 2 | $29,930 | $24,960 | $405,468 | $416,000 | -$7,250 | -$2,280 |
| 3 | $29,930 | $24,960 | $399,710 | $416,000 | -$7,250 | -$2,280 |
| 4 | $29,930 | $24,960 | $393,596 | $416,000 | -$7,250 | -$2,280 |
| 5 | $29,930 | $24,960 | $387,106 | $416,000 | -$7,250 | -$2,280 |
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How interest-only and P&I loans differ
On a principal and interest loan every repayment chips away at the balance, so you steadily build equity and the interest charged falls over time. On an interest-only loan you pay only the interest for a set period, commonly up to five years, which keeps repayments low but leaves the balance untouched. When the IO period ends the loan reverts to P&I over the shorter remaining term, and repayments jump.
That trade-off is the whole decision: lower repayments now against a higher total interest bill and a repayment shock later. Investors often accept it to protect short-term cash flow and keep the deductible balance high; owner-occupiers rarely benefit. Enter your own figures above to see the gap for your loan.
Questions about interest-only and P&I loans
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