How the estimate works
A simple monthly illustration is outstanding principal × annual interest rate ÷ 12. Actual loan documents may use daily accrual, different day-count conventions, minimum interest, or interest on undrawn funds.
Principal remains due
Scheduled interest-only payments do not reduce principal. The remaining balance must be repaid, refinanced, or amortized according to the loan agreement.
Budget beyond interest
Taxes, insurance, dues, maintenance, and fees can still be payable. Read the maturity, extension, default, and prepayment provisions.
Stress-test the exit
Consider a longer hold, lower property value, or higher refinance payment. Neither a sale nor a refinance is assured.
Further reading: CFPB explanation of interest-only loan mechanics. Consumer mortgage rules are not represented here as rules for a business-purpose loan.