See the low interest-only payment, and the jump when principal repayment begins.
An interest-only mortgage calculator shows the low payment during the interest-only period and the larger payment once you begin repaying principal, so you can see the jump before it happens.
During the interest-only period you pay only the interest, so the payment is small, but the balance doesn't fall at all. When that period ends, the full balance is amortized over the remaining years, so the payment jumps sharply, often by a third or more. Knowing that future number is the whole point of running this calculator.
Interest-only loans can fit borrowers with variable income who want flexibility, or those confident they'll sell or refinance before the reset. The danger is building no equity during the interest-only years, so if home values fall you can owe more than the house is worth, and the payment shock at reset can strain a budget that got used to the low payment.
It's simply the balance times the monthly rate, no principal. Because nothing reduces the balance, the payment stays flat until the interest-only period ends.
The full balance then amortizes over the shorter remaining term, so each payment must cover principal plus interest over fewer years, a much larger amount.
No, unless the home appreciates, the balance stays the same, so you build no equity through payments during those years.
See the exact formula and a worked example on our methodology page.