From Elizabeth Weintraub,
Your Guide to Home Buying / Selling.
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Definition: To compute an interest-only payment, multiply the original balance of the loan by the interest rate and divide by 12. Interest-Only payments are made up of interest and do not contain any principal. When the loan is due, the original balance is due.

Examples: If you borrow $10,000 payable monthly interest only at 8% for five years, you will pay $66.67 per month and owe $10,000 at the end of 60 months.

See about {link url=http://homebuying.about.com/od/financingadvice/qt/0207IOMortgages.htm]Interest Only Mortgages[/link]