Interest-Only vs Principal and Interest Calculator Explained for Australians
Compares interest-only repayments with principal and interest over the life of a loan. This guide walks through what each input means, the formula behind the answer and a worked example using typical Australian figures. You can follow along in the free Interest-Only vs Principal and Interest Calculator.
Why it matters
Buying property in Australia involves a deposit, stamp duty, lender requirements such as the APRA serviceability buffer, and ongoing repayments that move with interest rates. Investors also weigh rental yield, negative gearing and capital gains tax.
What you need to enter
The calculator asks for 4 inputs. The table shows each one with the example value used later in this guide.
| Input | Example value |
|---|---|
| Loan amount ($) | 600000 |
| Interest rate (%) | 6.2 |
| Loan term (years) | 30 |
| Interest-only period (years) | 5 |
The formula
IO repayment = loan × rate ÷ 12. When the IO period ends, the full loan is repaid over the shorter remaining term.
Worked example
Entering the example values above gives these results:
| Result | Value |
|---|---|
| Interest-only repayment | $3,100.00 |
| Principal and interest repayment | $3,674.81 |
| Repayment after IO ends | $3,939.49 |
| Extra interest from IO period | $44,914.78 |
The headline figure is $3,100.00 (interest-only repayment). Change any input in the calculator and every result updates instantly, so you can test different scenarios side by side.
How the interest-only repayment changes with loan amount
The table below keeps every other input at the example value and moves only “Loan amount ($)” up and down by 10% and 20%. It shows how sensitive the interest-only repayment is to that one figure.
| Loan amount ($) | Interest-only repayment |
|---|---|
| 480,000 | $2,480.00 |
| 540,000 | $2,790.00 |
| 600,000 | $3,100.00 |
| 660,000 | $3,410.00 |
| 720,000 | $3,720.00 |
At 480,000 the result is $2,480.00; at 720,000 it is $3,720.00. If a small change in this input moves the answer a lot, it is worth double-checking that figure before you rely on the result.
A practical tip
Repayments jump when an interest-only period ends. Budget for the higher amount before you start.
Keep going
Before relying on the number, read Interest-Only vs Principal and Interest Mistakes Australians Make and How to Avoid Them. You might also find these guides useful:
- How the Split Home Loan Calculator Works (With a Worked Example)
- Home Equity Calculator: Formula, Example and What the Result Means
- Using a Property Purchase Costs Calculator in Australia: A Step-by-Step Guide
Frequently asked questions
- Do these calculators match what my bank will say?
- Lenders use their own models, expense benchmarks and policies. Use these results to prepare, then speak to a lender or broker.
- Are stamp duty rates current?
- Duty thresholds are indexed or changed regularly. Always confirm with your state revenue office before relying on a figure.
- Is this financial advice?
- No. The calculators give general estimates only and don’t consider your objectives or financial situation.
Run your own numbers in the Interest-Only vs Principal and Interest Calculator.
Open the calculatorGeneral information only. Rates and thresholds change, usually on 1 July. Confirm current figures with the ATO or the relevant authority, and get personal advice for decisions about your situation.