Interest-Only Loan Reversion & Repayment Shock Calculator
Calculate the repayment jump when an interest-only period ends and reverts to principal and interest.
Last reviewed by the myCalculator Editorial Team
Input Parameters
Calculation Results
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Formula & How Interest-Only Loan Reversion & Repayment Shock Calculator Works
During an interest-only period no principal is repaid, so the full loan amount must then amortise over the shortened remaining term. A 5-year interest-only period on a 30-year loan compresses repayment of the entire principal into 25 years, producing a step increase in repayments — the repayment shock APRA has repeatedly flagged as a serviceability risk. Worked example: a $600,000 loan at 6.2% costs $600,000 × 0.062 ÷ 12 = $3,100 a month while interest-only. When it reverts to principal and interest over the remaining 25 years the repayment is about $3,939 a month, an increase of roughly $839. The balance has not fallen during the interest-only period, so you should plan for the jump in repayments.
- Enter Loan Amount ($) ($): Input your target parameter value.
- Enter Interest Rate (% p.a.) (%): Input your target parameter value.
- Enter Interest-Only Period (Years) (years): Input your target parameter value.
- Enter Total Loan Term (Years) (years): Input your target parameter value.
- Apply Formula: Calculate using
IO payment = P × r | P&I payment after reversion amortises P over (Total - IO) years. - Review Results: View exact computed answers, metrics, and worked mathematical proofs.
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Frequently Asked Questions (FAQs)
How much do repayments jump when interest-only ends?
On a $600,000 loan at 6.2% with a 5-year IO period, repayments rise from about $3,100 to roughly $3,950 per month — an increase of around 27% on the day the loan reverts.
Can I extend an interest-only period?
Lenders can extend, but it requires a fresh serviceability assessment and APRA limits the share of interest-only lending, so extensions are not guaranteed and usually attract a higher rate.
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Authoritative Standards & Verified Reference Citations
Calculations and mathematical logic on this page are grounded in published statutory rules, regulatory standards, and official government data published by the following bodies:
Consumer guidance on mortgage borrowing capacity, compound interest formulas, and loan fees.
Official cash rate target announcements, monetary policy statements, and national economic statistical data.
Official U.S. Federal Funds Rate and comprehensive macroeconomic time-series data.
Key Eurozone interest rates, deposit facility rates, and monetary policy operations.
Residential mortgage serviceability buffer framework (3.0% stress test hurdle rate).
Dedicated Australian home loans, borrowing capacity, mortgage repayments & refinance modeling.