Interest-Only Mortgage Calculator
Compute the interest-only monthly payment, total interest during the IO period, and the payment jump after it ends.
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At a glance:An interest-only mortgage (IO) is an arrangement where during a specified IO period you pay only interest and do not repay principal. The IO payment is lighter (monthly = loan × annual rate ÷ 12) but the principal is untouched; when the IO period ends you must amortise the full principal with interest over the remaining term (total − IO years), so the payment clearly jumps. IO suits borrowers expecting rising income or selling soon; the trade-off is higher total interest and the end-of-period payment jump. In Hong Kong pure IO residential mortgages are not mainstream, subject to HKMA LTV/DSR/stress-test rules. This calculator shows the IO monthly payment, total IO interest, and the post-IO jump for easy comparison with normal repayment.
Formula
IO monthly payment = loan × annual rate ÷ 12.
Total IO interest = IO monthly payment × (IO years × 12).
Post-IO monthly payment = amortise full principal over remaining term: PMT = P × r ÷ (1 − (1+r)^−n).
$$\text{IO Payment} = \dfrac{P \times \text{annualRate}}{12}$$$$\text{IO Interest Total} = \text{IO Payment} \times (\text{ioYears} \times 12)$$$$\text{Payment After IO} = P \times \dfrac{r}{1 - (1+r)^{-n}},\ r = \dfrac{\text{annualRate}}{12},\ n = (\text{totalYears} - \text{ioYears}) \times 12$$How to Use
- Enter the loan principal and annual mortgage rate.
- Set the interest-only period and total term.
- View the IO monthly payment, total IO interest, and the post-IO jump.
Loan HK$3,500,000, 4%, 30-year term — payment by IO period length. IO monthly pay is fixed at HK$11,666.67; the 30-year normal amortisation payout HK$16,709.54 for reference.
| IO period | IO monthly | Remaining term | Post-IO monthly | Jump |
|---|---|---|---|---|
| 3 yr | HK$11,666.67 | 27 yr | HK$17,682.29 | +HK$6,015.62 |
| 5 yr | HK$11,666.67 | 25 yr | HK$18,474.29 | +HK$6,807.62 |
| 10 yr | HK$11,666.67 | 20 yr | HK$21,209.31 | +HK$9,542.64 |
Case Studies
Case 1: Transitional cash-flow relief (HK$3.5m, 5-yr IO)
Mr Chow borrows HK$3,500,000 at 4% over 30 years; with unstable early income he chooses the first 5 years interest-only.
IO monthly is only HK$11,666.67, about HK$5,043 less than the normal HK$16,709.54; over 5 years he pays HK$700,000 interest but repays no principal.
After 5 years his business stabilises and the payment jumps to HK$18,474.29 (amortising HK$3.5m over 25 years). He must ensure income then covers it — that jump is the core IO risk.
Case 2: Longer IO → harder jump
Same HK$3.5m, 4%, 30 years: 3-yr IO → post-IO HK$17,682; extend to 10-yr IO → post-IO HK$21,209, even more than normal amortisation.
The longer the IO period, the shorter the remaining amortisation window, so the same HK$3.5m is repaid over fewer periods and the monthly is higher.
Lesson: IO is not free lunch — it defers and concentrates the burden at the back. Weigh future income capacity, not just present ease, to avoid payment trouble at term end.
FAQ
Is an interest-only mortgage worth it?
The IO payment is lighter, suiting those expecting rising income or selling soon. But the IO period does not reduce principal, the payment jumps after, and total interest is usually higher than normal repayment — weigh cash flow against long-run cost.
Why does the payment surge after the IO period?
Because no principal is repaid during IO; after it ends you must amortise the full principal with interest over the remaining term. Shorter remaining term and larger principal make the jump bigger — assess capacity in advance.
Are pure interest-only residential mortgages available in Hong Kong?
Pure IO residential mortgages are not mainstream in Hong Kong; they appear more in commercial/industrial property, developer first-hand short-term arrangements or private-banking solutions. All mortgages remain subject to HKMA LTV, DSR and stress-test rules; actual approval is per the bank's assessment.
Does an IO mortgage need to pass the stress test?
Yes. HKMA's DSR and rate-stress test assess repayment capacity. Banks usually assess against the higher 'normal amortisation' payment after the IO period (not the low IO payment) to ensure the borrower can cope with the later jump, so the IO period does not relax the requirement.
Can I repay principal early during the IO period?
It depends on the bank's terms. Some plans allow voluntary partial principal repayment during IO, reducing the later jump; others have early-repayment penalties or lock-in periods. If you plan to accumulate funds and repay a lump sum during IO, ask about the early-repayment arrangement and fees before signing.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.