Australian Interest-Only Loan Calculator
Compare interest-only repayments during the IO period with the higher P&I payments that follow. See total interest cost and the payment jump. AUD.
See how your monthly repayment changes when the IO period ends and you switch to principal and interest.
| Year | Phase | Monthly Payment | Principal Component |
|---|---|---|---|
| 1 | Interest Only | A$4,063 | $0 |
| 2 | Interest Only | A$4,063 | $0 |
| 3 | Interest Only | A$4,063 | $0 |
| 4 | Interest Only | A$4,063 | $0 |
| 5 | Interest Only | A$4,063 | $0 |
| 6 | P&I | A$4,924 | A$1,049 |
| 7 | P&I | A$4,924 | A$1,049 |
| 8 | P&I | A$4,924 | A$1,049 |
| 9 | P&I | A$4,924 | A$1,049 |
| 10 | P&I | A$4,924 | A$1,049 |
| 11 | P&I | A$4,924 | A$1,049 |
| 12 | P&I | A$4,924 | A$1,049 |
| 13 | P&I | A$4,924 | A$1,049 |
| 14 | P&I | A$4,924 | A$1,049 |
| 15 | P&I | A$4,924 | A$1,049 |
IO loans free up cash flow during the IO period. If invested, could those savings outpace the extra interest cost?
How Interest-Only Loans Work in Australia
During the interest-only period, your repayments cover only the interest — your loan balance does not reduce. After the IO period expires, you switch to principal and interest repayments, which are higher because you have the same original debt but fewer years to repay it.
IO rates in Australia are typically 0.2–0.5% higher than P&I rates for the same loan. APRA guidelines generally limit IO periods to 5 years for owner-occupiers and 10 years for investment loans.
The Formula
After IO Period:
P&I Payment = Loan × [r(1+r)^n] / [(1+r)^n - 1]
Where n = remaining years × 12
(Same principal, fewer months — higher payment)
Extra Cost vs P&I from Start:
= Total IO Interest - Interest saved from lower early payments
Example: Investment Property in Brisbane
$800,000 Investment Loan — 5-Year IO
| Loan Amount | $800,000 |
| IO Rate / IO Period | 6.50% / 5 years |
| P&I Rate / P&I Period | 6.20% / 25 years |
| IO Monthly Payment (yr 1-5) | $4,333 |
| P&I Monthly Payment (yr 6-30) | $5,298 |
| Payment jump at year 6 | +$965/month |
| Total IO Interest Paid | $260,000 |
| Extra cost vs P&I from start | ~$65,000 |
The investor benefits from $965/month lower repayments during the IO period for tax deduction purposes and cash flow management. However, they pay ~$65,000 more in total interest over the life of the loan.