Last updated 6:00am, 16th Jan 2021
An interest only loan, allows you to only pay the outstanding interest on your home loan. The balance or principal amount of your loan will not decrease until the interest only term has ended.
Interest only home loans are popular with investors seeking to maximise any potential negative gearing benefits or maximise repayments on non-deductable debt. These are two strategy which you can discuss with your accountant or financial planner, to understand if they could be right for you.
Lenders offer interest only loans for a fixed period, usually 1 to 5 years. At the end of the interest only term, the loan will automatically revert to principal and interest (‘P&I’) repayments, over the remaining loan term. As a result, the P&I repayments over remaining term will be higher than they might have been at the commencement of the loan.
If you would like to know more about interest only loans or would like to review your existing
interest only home loans, please with one of our qualified mortgage brokers today.
Can you request an extension to your interest only period, although most lenders will limit you to a maximise of 5 years. You can refinance your loan to a new lender, requesting a new interest only term.
Can I make principal repayments?Yes, most lenders will allow you to make principal repayments above your minimum interest only payment. Speak with your lender or your mortgage broker to check the process and policies of your home loan.
Is an interest only loan more expensive?Typically, an interest only loan has a higher interest rate than a principal and interest loan. Interest rates will vary between lenders and you should ensure you compare loans from a range of different lenders to find a suitable product.
If you would like assistance, our qualified mortgage brokers would be glad to help.
Should I make interest only repayments, on my investment loan?
Whether interest only loan repayments the right option, depends on an individual’s
strategy and circumstance. It is always recommended to seek advice from your accountant
or financial planner about your financial goals.
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The comparison rate is based on a loan amount of $150,000 over a 25 year term. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Terms, conditions, fees and charges apply and your full financial situation would need to be reviewed prior to acceptance of any offer or product.
