Interest-Only vs Principal & Interest Calculator
Compare how an interest-only loan stacks up against principal & interest — monthly repayments, total interest paid, the repayment shock when the IO period ends, and the year P&I becomes the cheaper option.
Rates, insurance, property management — not including your loan repayments.
1–30
P&I monthly
$3,597
IO monthly
$3,000
Monthly repayment after IO ends
$3,866
P&I cheaper from
Yr 17
P&I total interest
$695,029
IO total interest
$739,743
Extra annual cost (IO vs P&I)
$7,168
| Year | P&I repayment | IO repayment | P&I balance | IO balance | P&I cashflow | IO cashflow |
|---|---|---|---|---|---|---|
| 1 | $43,168 | $36,000 | $592,632 | $600,000 | -$11,768 | -$4,600 |
| 2 | $43,168 | $36,000 | $584,809 | $600,000 | -$11,768 | -$4,600 |
| 3 | $43,168 | $36,000 | $576,504 | $600,000 | -$11,768 | -$4,600 |
| 4 | $43,168 | $36,000 | $567,687 | $600,000 | -$11,768 | -$4,600 |
| 5 | $43,168 | $36,000 | $558,326 | $600,000 | -$11,768 | -$4,600 |
| 6 | $43,168 | $46,390 | $548,388 | $589,320 | -$11,768 | -$14,990 |
| 7 | $43,168 | $46,390 | $537,836 | $577,981 | -$11,768 | -$14,990 |
| 8 | $43,168 | $46,390 | $526,634 | $565,942 | -$11,768 | -$14,990 |
| 9 | $43,168 | $46,390 | $514,741 | $553,162 | -$11,768 | -$14,990 |
| 10 | $43,168 | $46,390 | $502,114 | $539,593 | -$11,768 | -$14,990 |
| 11 | $43,168 | $46,390 | $488,709 | $525,186 | -$11,768 | -$14,990 |
| 12 | $43,168 | $46,390 | $474,477 | $509,892 | -$11,768 | -$14,990 |
| 13 | $43,168 | $46,390 | $459,367 | $493,654 | -$11,768 | -$14,990 |
| 14 | $43,168 | $46,390 | $443,325 | $476,415 | -$11,768 | -$14,990 |
| 15 | $43,168 | $46,390 | $426,293 | $458,112 | -$11,768 | -$14,990 |
| 16 | $43,168 | $46,390 | $408,211 | $438,680 | -$11,768 | -$14,990 |
| 17 | $43,168 | $46,390 | $389,014 | $418,050 | -$11,768 | -$14,990 |
| 18 | $43,168 | $46,390 | $368,633 | $396,148 | -$11,768 | -$14,990 |
| 19 | $43,168 | $46,390 | $346,994 | $372,894 | -$11,768 | -$14,990 |
| 20 | $43,168 | $46,390 | $324,022 | $348,207 | -$11,768 | -$14,990 |
| 21 | $43,168 | $46,390 | $299,632 | $321,996 | -$11,768 | -$14,990 |
| 22 | $43,168 | $46,390 | $273,738 | $294,170 | -$11,768 | -$14,990 |
| 23 | $43,168 | $46,390 | $246,246 | $264,626 | -$11,768 | -$14,990 |
| 24 | $43,168 | $46,390 | $217,060 | $233,261 | -$11,768 | -$14,990 |
| 25 | $43,168 | $46,390 | $186,073 | $199,961 | -$11,768 | -$14,990 |
| 26 | $43,168 | $46,390 | $153,174 | $164,607 | -$11,768 | -$14,990 |
| 27 | $43,168 | $46,390 | $118,247 | $127,073 | -$11,768 | -$14,990 |
| 28 | $43,168 | $46,390 | $81,165 | $87,224 | -$11,768 | -$14,990 |
| 29 | $43,168 | $46,390 | $41,797 | $44,917 | -$11,768 | -$14,990 |
| 30 | $43,168 | $46,390 | $0 | $0 | -$11,768 | -$14,990 |
How interest-only and P&I loans differ
On a principal & 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 versus 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.
Frequently asked questions
- What is the difference between interest-only and principal & interest?
- With principal & interest (P&I) each repayment covers the interest charged plus a slice of the loan balance, so the debt shrinks over time. With interest-only (IO) you pay only the interest for a set period — usually up to five years — so repayments are lower but the balance does not reduce at all during that period.
- Does interest-only cost more over the life of the loan?
- Almost always, yes. Because you defer paying down the balance, interest is charged on the full loan amount for longer, and you then repay the whole balance over a shorter remaining term. Over a typical 30-year loan the total interest on an IO loan is materially higher than on a P&I loan. This calculator shows the total-interest gap for your figures.
- What is the interest-only 'repayment shock'?
- When the interest-only period ends the loan converts to principal & interest, but over a shorter remaining term (for example 25 years instead of 30). Squeezing the full balance into fewer years pushes the repayment well above both the earlier IO repayment and what a P&I repayment would have been from day one. The calculator shows this post-IO repayment so you can check it against your budget.
- Why do property investors use interest-only loans?
- Investors often choose IO to maximise short-term cash flow and keep the deductible loan balance high, directing spare cash to non-deductible debt (like their own home) or to further deposits. It is a cash-flow and tax-position strategy, not a way to reduce the true cost of borrowing. Interest on an investment loan is generally tax-deductible; repayments of principal are not, regardless of loan type.
- Is this calculator financial advice?
- No. It provides estimates based on the figures you enter and does not account for fees, rate changes, offset accounts, or your personal circumstances. Confirm any decision with a licensed mortgage broker or financial adviser.
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