Mortgage Calculator: Interest Only vs. Fixed Rate

Which option is right for you: an interest-only or fixed-rate loan?

With an interest-only loan, you can suspend principal payments periodically in order to deal with unexpected reductions in income. A fixed-rate mortgage, on the other hand, gives you the confidence of set monthly payments that will never change over the course of the loan.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended as a solicitation for any credit product or to provide credit advice. Calculators and input options are intended solely for general information and educational purposes. Calculations are hypothetical, and based on information and assumptions provided by you. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. You should not take any action on the basis of the information provided through this calculator. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Which mortgage is right for me?

If you are a professional who occasionally receives large bonuses or commissions and could use that cash to pay larger lump-sum payments toward the loan with lower monthly payments in between, then you could be an ideal candidate for an interest-only loan. Having the ability to determine the right and achievable amount of equity over the loan term is a great benefit.

However, as with many things, there are risks. If you have an interest-only loan and cannot stick to your financial plan and find you are unable to make the larger lump-sum payments, you could run into trouble and end up overpaying your desired amount of interest.

How to use this calculator

Home info:

Begin by entering basic home information, including purchase price, down payment, and expected years in home.

Interest only:

Enter prospective interest-only loan details, including term, interest-only period, interest rate, origination charge, discount points, and other settlement services. Your interest rate will be determined by your mortgage broker, but if you aren’t yet to this step, you can find current rates here.

The origination charge is generally between 0.5% and 1% of your mortgage loan, but check with your mortgage specialist to confirm. For Other Settlement Services, consider the cost of an appraisal, credit report, flood certification, tax service, lender and owner’s title insurance, and government recording fees.


For your prospective fixed-rate loan, select the term, interest rate, origination charge, discount points, and other settlement services. See the calculator above for more information on interest rates, origination charges, and other settlement services.

Taxes & insurance:

To find property taxes, check MLS listings online, or contact your county’s assessor/recorder’s office or a local real estate agent. Calculate homeowner’s insurance here, or contact an insurance agent for a quote.