# Interest-only mortgage calculator

> Your repayments while you pay only interest, what they rise to afterwards and the extra interest it costs.

Use it in a browser at https://buyingahouse.co.nz/tools/interest-only-mortgage-calculator, or call it through the site's MCP server at https://buyingahouse.co.nz/mcp.

## How this calculator works

An interest-only loan works in two stages. At first, you just pay the interest, so your loan balance stays the same. The calculator spreads the yearly interest rate over your repayments. When the interest-only period ends, your loan changes to a standard table loan, and you start paying off the full amount over the years left. Since you haven't paid down the loan yet and have less time to do it, your repayments are higher than if you'd paid principal and interest from the start.

The calculator starts with a $630,000 loan, which is about the national median sale price of $784,363 minus a 20% deposit, at 4.95%, the average 1-year special rate at the end of October 2026. The interest-only period is set to 3 years, the longest Westpac offers on a home you live in. You can change these numbers to match your own loan.

The calculator assumes the interest rate stays the same for the whole loan. In real life, you'll probably refix your rate during the loan, so it could change over time.

## Common questions

### How long can you have an interest-only home loan in NZ?

Each bank has its own limit. Westpac offers interest-only for up to 3 years on a home you live in and up to 5 years on an investment property.

### Is an interest-only mortgage cheaper?

Your repayments start out lower, but you'll pay more interest in the long run. For example, on a $630,000 loan at 4.95% over 30 years, 3 years of interest-only adds about $26,000 in interest.

### What happens when the interest-only period ends?

Your repayments go up because you start paying off the full loan over the years left. On the same loan, fortnightly repayments of $1,199.42 during the interest-only period rise to $1,627.66 afterwards. That's higher than the $1,551.29 you'd pay if you'd paid principal and interest from the start.

### Why do people choose interest-only?

People often use interest-only loans for investment properties. BNZ says they can help free up cash for things like renovations.