Short answer
When an interest-only period ends, the full modelled balance must be repaid over the shorter remaining loan term. That can make the later principal-and-interest repayment materially higher than the interest-only payment.
Enter the balance, total term, interest-only period and rates you want to test. The result is an estimate based on those assumptions. It does not predict a lender's future rate or assess whether the repayment is affordable.
How the calculation works
During the interest-only period, the monthly payment is:
Balance x annual interest rate / 12
The model holds the balance constant. After the interest-only period, it calculates a standard amortising monthly payment on that balance over the remaining term.
ASIC Moneysmart notes that interest-only repayments do not reduce the principal and that repayments increase when the loan changes to principal and interest. APRA's serviceability guidance says lenders should assess an interest-only loan over the residual principal-and-interest term.
Worked example
Assume a $600,000 balance, a 30-year total term, five interest-only years and a 6.50% annual rate for both stages.
- Interest-only payment: $3,250 a month.
- Remaining term: 25 years.
- Later principal-and-interest payment: about $4,051.24 a month.
- Indicative payment increase: about $801.24 a month.
The result assumes the balance is still $600,000 when principal repayments begin. An offset account, extra repayments, redraw, capitalised fees or a different later rate would change the result.
What the result means
The payment change isolates two effects: the repayment type changes, and the balance must be amortised over fewer years. A lower later interest rate can reduce the change, while a higher rate can increase it.
Use the Mortgage Repayment Calculator for a standard principal-and-interest scenario, the Rate Change Impact Calculator to isolate a rate movement, or the Loan Comparison Calculator to compare fees and product terms.
Assumptions and limitations
- Monthly payments only.
- The balance stays constant during the interest-only period.
- Each entered rate stays constant for its full stage.
- No offset, redraw, extra repayment, fee, capitalised charge or missed payment is modelled.
- The later payment starts immediately after the interest-only period.
- Lender calculation conventions, rounding and payment dates may differ.
- Tax treatment is not calculated.
Check the loan contract and a current lender repayment schedule before relying on an amount. If the later payment may be difficult to meet, contact the lender early or speak with a licensed financial counsellor.
Sources
- ASIC Moneysmart: Interest-only home loans, updated 18 June 2026 and checked 11 August 2026.
- APRA Prudential Practice Guide APG 223, current guide dated 19 June 2025 and checked 9 August 2026.
General information disclaimer
This calculator provides general information and indicative estimates based on the assumptions entered. It is not financial advice, credit advice, a lender assessment, repayment schedule, quote, approval or recommendation. Rates, fees, loan terms and lender methods vary. Check the loan documents and speak with a licensed professional where appropriate.
Last updated: 9 August 2026.
